INDEPENDENT PUBLICATION BY RACONTEUR.

NET #0528 21 / 06 / 2018

CRYPTOCURRENCIES
03 BRINGING LAW AND ORDER
TO A NEW FRONTIER 08 CRYPTOS SET TO CASH IN
AS MONEY LOSES APPEAL 16 TOP WOMEN DRIVING
CRYPTO EVOLUTION
 RACONTEUR.NET 03

REGULATION

CRYPTOCURRENCIES

Bringing law and order

Distributed in

to a new frontier
Bitcoin and other cryptocurrencies seem on the cusp of revolutionising global
finances, but regulators are unsure of how to deal with such an innovation

entrust it with significant swathes

CONTRIBUTORS DAVID COWAN of our financial infrastructure. We

FIONA BOND
Freelance financial
journalist, she was
commodities editor at
Interactive Investor.
DAVID COWAN
Author and editor-at-large
of The Global Legal Post,
Dr Cowan specialises
in a range of legal and
economic issues, and is a
regular contributor to The
Times Literary Supplement.
SAM SHAW
Formerly an editor at
FT Business, she is now
a freelance writer on a
range of topics, including
JOEL CLARK
Freelance financial
writer and editor, he
covers workplace issues,
technology, regulation,
risk management,
capital markets trading
and derivatives.
OLIVER PICKUP
Award-winning
journalist, ghostwriter
and media consultant,
he specialises in
technology, business,
sport and culture.
FINBARR TOESLAND
Freelance journalist,
he specialises in
technology, business
and economic issues,
A
need to ask ourselves as regulators
ccording to Microsoft pres- what we should do so that we are not
ident Brad Smith: “If you inhibiting the benefits nor overlook-
create technology that ing the risks.”
changes the world, the The evolution of cryptocurrency
world is going to want to govern you; will continue in a process of trial
it’s going to want in some measure to and error as the user experience
regulate you.” This is certainly the and understanding improves, which
case with cryptocurrencies. brings in the legal aspects. The chal-
When things go wrong, they lenge regulatory authorities and
attract the interest of regulators, the industry face is that cryptocur-
and some things have gone wrong rencies are so new that they do not
in crypto with warnings of cyber- fit neatly into laws that were passed
theft, trading outages or allegations decades ago prohibiting misconduct
of market manipulation. in the securities and commodities
The two big regulatory questions markets. “It will take time for those
are how and when. Events have led regulations to catch up,” says Paul
to a handful of outright bans and a Anning, financial institutions group
few enthusiasts jockeying for juris- partner at law firm Osborne Clarke
dictional position, but for most mar- in London.
kets the approach is optimistically Market participants are cam-
cautious. Regulators around the paigning for regulation because it

business, finance, and contributes to a wide
world are trying to figure out how
marketing and technology. range of publications.
they should treat cryptocurrencies,
while the industry wonders when
BURHAN WAZIR
they can expect firm regulations.
Award-winning journalist
and editor, he has worked John Salmon, partner at law
at The Observer, The Times firm Hogan Lovells in London,
and Al Jazeera. says: “What is driving regulation
is the worry about scams, terror-
ism, anti-money laundering laws,
know your customer and so on,
and there is also the concern about
investor protection.”
The regulators want protection
against risks, while the industry
Publishing manager Head of production wants innovation. Ryan Zagone,
Reuben Howard Justyna O'Connell director of regulatory relations at
Ripple, says: “What we are seeing is
Production editor Digital content executive
Benjamin Chiou Francesca Cassidy a global conversation about the bal-
ance between risk and innovation.”
Managing editor Design Coming to terms with the issues
Peter Archer Grant Chapman requires education for regulators
Kellie Jerrard
and industry. However, the issues
Samuele Motta
need to be put into the perspec-
Head of design tive that the size of the cryptocur-
Tim Whitlock rency market is considerably less
than its reputation and headlines.
These headlines cast a giant shadow
and there is a danger of seeing the
Although this publication is funded through advertising and threats as being greater than they
sponsorship, all editorial is without bias and sponsored features are, which will destroy the benefits.
are clearly labelled. For an upcoming schedule, partnership Mr Salmon explains: “The mar-
inquiries or feedback, please call +44 (0)20 3877 3800 or ket is less than 1 per cent of GDP,
cryptocurrency is used for legiti-
mate and good economic reasons.
Understanding how regulation will
evolve requires viewing the chal-
lenge in three dimensions: eco-
nomic, technological and legal.
The economic question is why
have there been so many booms
and busts in cryptocurrency? The
simplest answer comes from econ-
omist Nouriel Roubini of Roubini
Macro Associates and New York
University’s Stern School of
Business. He criticises bitcoin and
other cryptocurrency as the “big-
gest bubble in human history”,
comparing it to the 17th-century
tulip crisis.
However, Dr Roubini, also
known as “Doctor Doom”, is prob-
ably off the mark. As Dr Andrei
Kirilenko, director of the Centre for
Global Finance and Technology at
S3studio/Getty Images
Imperial College Business School in
London, notes: “There have always
been booms and busts in various
financial markets, especially as
new assets are invented.”
Mary Starks, director of com-
petition at the Financial Conduct
Authority, says: “Most people now
view bitcoin and other such coins as
an asset class rather than a means
of payment, hence ‘crypto assets’,
which is probably both cause and
effect of swings in the value.” She
adds: “This has a range of public
policy implications.” The good news
is regulators and industry want the
same thing: certainty.
Turning to the technology, Ms
Starks says: “We will need to under-
stand this technology, its strengths
and its vulnerabilities, and its impli-
cations for competition, much bet-
ter before we are comfortable to
brings the much-needed benefit of
certainty. Mr Salmon explains: “The
priority is dealing with the uncer-
tainty and to achieve this the indus-
try needs a consistent taxonomy
to deal with the problem of differ-
ent terms being used.” Mr Zagone
agrees: “Regulatory certainty is
needed and greater co-ordination.
Self-regulation works where you
have a mature industry and strong
governance. This technology is at an
early stage, so it is too early to be an
option, but could be in the future.”
With legal certainty comes the ben-
efit of confidence. Matt Bisanz, finan-
cial services regulatory and enforce-
ment associate at Mayer Brown in
Washington, says: “Safeguards and
protections will inspire confidence.
We’ve seen this with other tech-
nology developments, like online
grocery delivery. When it was first
launched there were doubts, but
it happened in incremental steps
and we are now comfortable with it.
There was trial and error. The same
will happen here.”
The snapshot of cryptocurrency
regulation is that much discovery
work is being done this year, which
will create the foundation for mak-

63%
email info@raconteur.net so regulators aren’t so concerned ing 2019 the year of cryptocur-

64% 48
Raconteur is a leading publisher of special-interest content and think decentralised
about financial resilience effects.” exchanges will gain rency regulation. The G20 expects
research. Its publications and articles cover a wide range of topics,
However, he says: “Scams are out traction as they are to have proposals out next month,
including business, finance, sustainability, healthcare, lifestyle and
technology. Raconteur special reports are published exclusively in there, they need to be addressed and much more difficult and other national and industry
The Times and The Sunday Times as well as online at raconteur.net everyone knows this, but we don’t to regulate bodies are mulling their options.
The information contained in this publication has been obtained want to stifle the industry, and if There is a global process of learn-
from sources the Proprietors believe to be correct. However, regulation comes too early then we believe jurisdictions will ing and reflection to ensure reg-
no legal liability can be accepted for any errors. No part of this
publication may be reproduced without the prior consent of the
could end up with bad regulation.”
The benefits to regulation are
of cryptocurrency
% be entrepreneurial and
aim to lure exchanges and
businesses with attractive
ulatory goals are achieved, while
making sure innovative energy is
Publisher. © Raconteur Media
clear in the certainty of use and investors believe regulatory regimes not quashed. “I’m more optimis-
value, good consumer protection, exchanges will become tic now than I’ve ever been,” Mr
@raconteur /raconteur.net @raconteur_london excluding bad players, and ensuring increasingly regulated Coindesk 2018 Zagone concludes.

raconteur.net /cryptocurrencies-2018
 RACONTEUR.NET 03

REGULATION

CRYPTOCURRENCIES

Bringing law and order

Distributed in

to a new frontier
Bitcoin and other cryptocurrencies seem on the cusp of revolutionising global
finances, but regulators are unsure of how to deal with such an innovation

entrust it with significant swathes

CONTRIBUTORS DAVID COWAN of our financial infrastructure. We

FIONA BOND
Freelance financial
journalist, she was
commodities editor at
Interactive Investor.
DAVID COWAN
Author and editor-at-large
of The Global Legal Post,
Dr Cowan specialises
in a range of legal and
economic issues, and is a
regular contributor to The
Times Literary Supplement.
SAM SHAW
Formerly an editor at
FT Business, she is now
a freelance writer on a
range of topics, including
JOEL CLARK
Freelance financial
writer and editor, he
covers workplace issues,
technology, regulation,
risk management,
capital markets trading
and derivatives.
OLIVER PICKUP
Award-winning
journalist, ghostwriter
and media consultant,
he specialises in
technology, business,
sport and culture.
FINBARR TOESLAND
Freelance journalist,
he specialises in
technology, business
and economic issues,
A
need to ask ourselves as regulators
ccording to Microsoft pres- what we should do so that we are not
ident Brad Smith: “If you inhibiting the benefits nor overlook-
create technology that ing the risks.”
changes the world, the The evolution of cryptocurrency
world is going to want to govern you; will continue in a process of trial
it’s going to want in some measure to and error as the user experience
regulate you.” This is certainly the and understanding improves, which
case with cryptocurrencies. brings in the legal aspects. The chal-
When things go wrong, they lenge regulatory authorities and
attract the interest of regulators, the industry face is that cryptocur-
and some things have gone wrong rencies are so new that they do not
in crypto with warnings of cyber- fit neatly into laws that were passed
theft, trading outages or allegations decades ago prohibiting misconduct
of market manipulation. in the securities and commodities
The two big regulatory questions markets. “It will take time for those
are how and when. Events have led regulations to catch up,” says Paul
to a handful of outright bans and a Anning, financial institutions group
few enthusiasts jockeying for juris- partner at law firm Osborne Clarke
dictional position, but for most mar- in London.
kets the approach is optimistically Market participants are cam-
cautious. Regulators around the paigning for regulation because it

business, finance, and contributes to a wide
world are trying to figure out how
marketing and technology. range of publications.
they should treat cryptocurrencies,
while the industry wonders when
BURHAN WAZIR
they can expect firm regulations.
Award-winning journalist
and editor, he has worked John Salmon, partner at law
at The Observer, The Times firm Hogan Lovells in London,
and Al Jazeera. says: “What is driving regulation
is the worry about scams, terror-
ism, anti-money laundering laws,
know your customer and so on,
and there is also the concern about
investor protection.”
The regulators want protection
against risks, while the industry
Publishing manager Head of production wants innovation. Ryan Zagone,
Reuben Howard Justyna O'Connell director of regulatory relations at
Ripple, says: “What we are seeing is
Production editor Digital content executive
Benjamin Chiou Francesca Cassidy a global conversation about the bal-
ance between risk and innovation.”
Managing editor Design Coming to terms with the issues
Peter Archer Grant Chapman requires education for regulators
Kellie Jerrard
and industry. However, the issues
Samuele Motta
need to be put into the perspec-
Head of design tive that the size of the cryptocur-
Tim Whitlock rency market is considerably less
than its reputation and headlines.
These headlines cast a giant shadow
and there is a danger of seeing the
Although this publication is funded through advertising and threats as being greater than they
sponsorship, all editorial is without bias and sponsored features are, which will destroy the benefits.
are clearly labelled. For an upcoming schedule, partnership Mr Salmon explains: “The mar-
inquiries or feedback, please call +44 (0)20 3877 3800 or ket is less than 1 per cent of GDP,
cryptocurrency is used for legiti-
mate and good economic reasons.
Understanding how regulation will
evolve requires viewing the chal-
lenge in three dimensions: eco-
nomic, technological and legal.
The economic question is why
have there been so many booms
and busts in cryptocurrency? The
simplest answer comes from econ-
omist Nouriel Roubini of Roubini
Macro Associates and New York
University’s Stern School of
Business. He criticises bitcoin and
other cryptocurrency as the “big-
gest bubble in human history”,
comparing it to the 17th-century
tulip crisis.
However, Dr Roubini, also
known as “Doctor Doom”, is prob-
ably off the mark. As Dr Andrei
Kirilenko, director of the Centre for
Global Finance and Technology at
S3studio/Getty Images
Imperial College Business School in
London, notes: “There have always
been booms and busts in various
financial markets, especially as
new assets are invented.”
Mary Starks, director of com-
petition at the Financial Conduct
Authority, says: “Most people now
view bitcoin and other such coins as
an asset class rather than a means
of payment, hence ‘crypto assets’,
which is probably both cause and
effect of swings in the value.” She
adds: “This has a range of public
policy implications.” The good news
is regulators and industry want the
same thing: certainty.
Turning to the technology, Ms
Starks says: “We will need to under-
stand this technology, its strengths
and its vulnerabilities, and its impli-
cations for competition, much bet-
ter before we are comfortable to
brings the much-needed benefit of
certainty. Mr Salmon explains: “The
priority is dealing with the uncer-
tainty and to achieve this the indus-
try needs a consistent taxonomy
to deal with the problem of differ-
ent terms being used.” Mr Zagone
agrees: “Regulatory certainty is
needed and greater co-ordination.
Self-regulation works where you
have a mature industry and strong
governance. This technology is at an
early stage, so it is too early to be an
option, but could be in the future.”
With legal certainty comes the ben-
efit of confidence. Matt Bisanz, finan-
cial services regulatory and enforce-
ment associate at Mayer Brown in
Washington, says: “Safeguards and
protections will inspire confidence.
We’ve seen this with other tech-
nology developments, like online
grocery delivery. When it was first
launched there were doubts, but
it happened in incremental steps
and we are now comfortable with it.
There was trial and error. The same
will happen here.”
The snapshot of cryptocurrency
regulation is that much discovery
work is being done this year, which
will create the foundation for mak-

63%
email info@raconteur.net so regulators aren’t so concerned ing 2019 the year of cryptocur-

64% 48
Raconteur is a leading publisher of special-interest content and think decentralised
about financial resilience effects.” exchanges will gain rency regulation. The G20 expects
research. Its publications and articles cover a wide range of topics,
However, he says: “Scams are out traction as they are to have proposals out next month,
including business, finance, sustainability, healthcare, lifestyle and
technology. Raconteur special reports are published exclusively in there, they need to be addressed and much more difficult and other national and industry
The Times and The Sunday Times as well as online at raconteur.net everyone knows this, but we don’t to regulate bodies are mulling their options.
The information contained in this publication has been obtained want to stifle the industry, and if There is a global process of learn-
from sources the Proprietors believe to be correct. However, regulation comes too early then we believe jurisdictions will ing and reflection to ensure reg-
no legal liability can be accepted for any errors. No part of this
publication may be reproduced without the prior consent of the
could end up with bad regulation.”
The benefits to regulation are
of cryptocurrency
% be entrepreneurial and
aim to lure exchanges and
businesses with attractive
ulatory goals are achieved, while
making sure innovative energy is
Publisher. © Raconteur Media
clear in the certainty of use and investors believe regulatory regimes not quashed. “I’m more optimis-
value, good consumer protection, exchanges will become tic now than I’ve ever been,” Mr
@raconteur /raconteur.net @raconteur_london excluding bad players, and ensuring increasingly regulated Coindesk 2018 Zagone concludes.

raconteur.net /cryptocurrencies-2018
04 CRYPTOCURRENCIES
INDIA
Crackdown on
crypto companies
Once a front runner in cryptocurrencies and crypto exchanges,
India has now sought to shut down trading
BURHAN WAZIR
E
ver since he was elected in
2014, India’s prime minister
Narendra Modi has pledged
to use technology to acceler-
ate national development and boost
growth. Promising to make govern-
ment more transparent and innova-
tive, Mr Modi says he will overhaul
healthcare, banking and govern-
ment services.
He has already announced that
India is partnering with Google
to bring wifi to 500 railway sta-
tions across the country. He also
says he will aggressively expand
the nation’s broadband network to
600,000 villages.
But the Indian government has
struck a more cautious tone when
faced with the often tumultu-
ous rise of cryptocurrencies and
crypto exchanges. In recent years,
India has become a regional leader
for cryptocurrencies and trading
exchanges. According to industry
figures, in May 2017 India accounted
for almost 10 per cent of all global
cryptocurrency trades.
In April, the Reserve Bank of
India abruptly introduced meas-
ures to halt the flow of digital
funds into the banking sector. The
bank said all regulated financial
companies must end services to
individuals or businesses dealing
with bitcoin and other cryptocur-
rencies using blockchain technol-
ogy within 90 days.
The new rules, which come into
effect on July 5, effectively bar
traders and investors from using
India’s regulated banking system
to buy or sell virtual currencies
for rupees online. Facing a pos-
sible legal challenge, the central
bank later appeared to concede
that its ban was not based on
detailed research.
The Indian government’s caution
mirrors that of a number of oth-
ers around the world. Nations such
as Algeria and Bangladesh have all
prohibited the use of cryptocur-
rencies and last September China
moved to shut down all cryptocur-
rency exchanges.
India’s decision coincided with a
ruling by neighbouring Pakistan’s
central bank that cryptocur-
rencies were no longer deemed
legal in the Islamic republic. The
State Bank of Pakistan told other
banks and financial services pro-
viders to refuse any customers
seeking cryptocurrency transac-
tions. The bank also said those
using cryptocurrencies to transfer
money outside of Pakistan could
be prosecuted.
RACONTEUR.NET 05
Commercial feature
Kuni Takahashi/Bloomberg via Getty Images
Yet it wasn’t until recently that the representing CoinDelta cryptocur-
Indian government began to issue rency exchange in challenging the
warnings on a sector which is esti- Indian central bank’s decision. Mr
mated to have added 200,000 new Rastogi warns that a ban isolating
users each month. Last December, cryptocurrencies from the banking
Tracking
the Indian finance ministry sector would either push companies
described digital currency invest- abroad or underground into an ille-
ments as being like “Ponzi schemes” gal “dark” sector.
and urged caution when investing in “The promising companies are
progress in
cryptocurrencies. The ministry said going to flee outside the country,” he
investors transacting with digital says. “Worse is that the Reserve Bank
currencies were doing so “entirely at of India (RBI) directive comes in
their risk and should best avoid par- advance of a decision by the govern-
cryptocurrencies
ticipating therein”. ment on the legality of and regula-
In addition, the finance ministry tory mechanics for cryptocurrencies.
highlighted possible national secu- If the government or the court were
rity threats and said the nature of to decide in favour of crypto busi-
encrypted transactions meant they nesses eventually, the RBI directive
could be used for activities such as would have by then taken a complete
“terror-funding, smuggling, drug toll on the businesses, innovation
trafficking and other money laun-
dering acts”.
and wealth in cryptos that has been
created so far in the country.”
Evolution of cryptocurrencies and blockchain is close
Crypto specialists have viewed to a tipping point as central banks and governments
the Indian central bank’s ruling as
a glaring example of bureaucratic are now starting to recognise the opportunities
overreach that could stifle innova-
tion. “The way I see it, the Indian
government, or the bureaucratic Crypto specialists
B
system, is not really proficient in have viewed the
understanding new technological itcoin and blockchain have and blockchain as they realise the scale bought by inexperienced investors who big financial centres have historically but this is bound to change. With
advancements like cryptocurren- Indian central evoked mixed reactions for of the opportunities. have never previously owned a stock, been driven to adapt by new products, the volume of financial and human
cies or blockchain,” says Awanish bank’s ruling as a many years now. After it was This has the potential to completely bond or currency. In other words, the technology and shifts in demand. The resources now being pumped into
Rajan, co-founder and chief execu- first unveiled in 2009, bitcoin reshape traditional financial markets as technology on which the financial ser- advent of electronic communications, the technology, it is advancing very
tive of www.idap.io, a forthcoming glaring example was widely dismissed as a specula- we know them. Cryptocurrencies bring vices system could one day come to for example, allowed hedge funds quickly. The priority for main centre
crypto-derivatives exchange, regis-
tered in Estonia, preparing an initial
of bureaucratic tive bubble that was bound to burst
and cryptocurrencies have remained
new technologies, new markets and
new systems, driven from the ground
depend is owned not by central banks,
governments or professional investors,
to move from the City of London to
Mayfair and from Wall Street to Boston.
market practitioners and regulators
should be to recognise that block-
coin offering. overreach that could largely a fringe activity since then. up by market practitioners and indi- but rather by members of the public. The building of Canary Wharf in London chain is here to stay and looks set
Mr Rajan says Indian regula- Meanwhile, broader attention has vidual investors rather than by central The financial services sector is well and most recently Hudson Yards in New to become an integral part of main-
tors were seeking top-down con-
stifle innovation focused on the opportunities that banks or governments. If cryptos con- accustomed to change, of course, and York has further dispersed historically stream trading. If they do not adapt
trol over cryptocurrencies and might be derived from the underlying tinue to evolve at the current pace, famous financial centres. these developments, they will find
exchanges. “They are not pro- distributed ledger technology. China this could bring about a revolution in The development of blockchain and smaller, more dynamic financial cen-
01 ficient in understanding how it and India are so against the new tech- the way financial services are deliv- cryptocurrencies could be even more tres stealing a march.
works and they couldn’t see what CoinDelta founder Shubham nology they have decided to impose ered and consumed. The digitisation of disruptive, further diminishing the role As with every innovation, there is a
was happening in the crypto Yadav says the ruling had a big complete bans on crypto trading. assets has the potential to democratise of New York, London, Tokyo, Shanghai tipping point, a switch in sentiment
space. They felt they were los- impact on business; new users on In more recent months, however, often closed investment areas, giving and Singapore as leading financial cen- and understanding that leads to bigger
ing their authority over the sys- the trading platform had fallen countries such as Japan have proac- the general public access to markets tres. Many of these cities have retained changes. We believe that tipping point
tem and didn’t really understand from a peak of between 7,000 and tively embraced digital currencies, and products in a way which has not their pre-eminence because of the for crypto is very close. When major
either blockchain or cryptocur-
rencies. My suggestion was to fol-
8,000 a day to just 50 to 60 after
the ruling. “We are an exchange,
and the same commercial banks and
investment banks that had previously
happened before.
The bulk of investment in blockchain
When major investment banks liquidity they manage and the high
concentration of banks, technology
investment banks are allocating sub-
stantial resources to develop their
low a country which has taken so it has impacted us on a huge decried crypto as the mother of all and digital currencies so far has come are allocating substantial and buy-side firms in those areas. own blockchains, we know things are
resources to develop their own
a good lead on this, for example scale,” he says. “The RBI’s deci- bubbles are discreetly realigning their not from the official sector, but rather Blockchain has no such physical con- changing. The market volatility is now
Japan. But that hasn’t happened.” sion also has a lot of other unin- positions. Driven by recent volatility through unconventional channels such straints when it comes to liquidity or understood and investors are looking
Yet even as India prepares for tended consequences. When the and the gradual transition of crypto as crowdfunding. Initial coin offerings blockchains, we know things technology. The beauty of a distributed past the market fluctuations at long-
the new rules to come into effect, a RBI asks banks to shut down the into a professional asset class, many generate the capital to develop new ledger is that it can be accessed and term value – and the official sector is
number of companies have chosen accounts of businesses like ours, are now actively investing in bitcoin crypto assets, but they are often being are changing amended anywhere, with no need to now doing the same.
to fight the central bank’s decision they are effectively asking them concentrate around existing financial
in court. Other exchanges, such as not to support companies like centres. Each chain is equivalent to a
Unocoin, are considering moving us. We use these accounts for our new financial ecosystem and investors
abroad to another country. operating expenses and salaries. are closely watching the space to iden-
Revolution not anarchy
“The innovation that has hap- This means we have to think about tify which will endure for the long term.
pened in the Indian crypto-ex- banking elsewhere.” “Anti-establishment, libertarian and “The answer is of course no. This does facto major players influencing market From complicated investments to retail
change space over the last couple of The central bank has said it is revolutionary – all words which have been not mean that the same types of regulation prices. This is already a broken model. operations, it offers a new transparent,
years will be stifled,” says Anirudh exploring the possibility of creat- used to describe cryptocurrencies and which are applied to fiat currencies need to “There is also a finite cap of 21 million accessible way of managing data.
Rastogi, managing partner at TRA ing a digital currency of its own and the rise of blockchain technology.  From be in place. However, like water cascading bitcoins – at this stage about 17 million Up until now, main centre regulators
Law, a Delhi legal firm. TRA Law is Indian state entities have already the moment it was formed through to down a hill, its power and purpose can coins have been mined – so this risk of have largely focused their attention
shown interest in using blockchain the meteoric growth in the people and only be captured and controlled when it is concentration means bitcoin cannot be on concerns over fraud and market
technology to tackle challenges firms associated with crypto, the message channelled and directed.  compared to any other market; it’s efficiency manipulation associated with crypto-
Paul Miller/Bloomberg via Getty Images
01 ranging from land registration to has always been that this will change the “We are now in a period of its and attractiveness are compromised. currencies and initial coin offerings.
The Reserve Bank of managing healthcare records. world. And it will do this without the need development when as many new “We have to hope the emergence of new This is, of course, absolutely right, and
India has conceded
that the ban
Critics hope the government will for government intervention or regulation,” ‘regulatory’ bodies are being formed as new tokens and market participants, typically they are aware of the potential oppor-
announced in April quickly relax the banking ban on says Philippe Ghanem, vice chairman and coins issued. This tells me that there has to smaller but more numerous individual tunities provided by blockchain to
was not based on cryptocurrencies in favour of a chief executive of ADS Securities. be governance. Systems are needed which investors, speculators and more traditional promote greater transparency, secu-
detailed research “It is the intellectual freedom which has set the boundaries and rules required to institutional players, will take a bigger market
tax. “They talk about blockchain rity and ease of access for a broader
without really understanding how created the phenomenon we see today; protect companies and individuals.  role. Ultimately, it is the spread of the spectrum of investors and traders. In Philippe Ghanem
02
Prime minister it works,” says Mr Rajan. “You can however, can it really be unregulated? If “However, no central bank or entity technology and increased market access, the long run, it is those agencies with Vice chairman and chief executive
Narendra Modi streamline your governing, but it is setting out to change the way that is controlling distributed ledger government regulation, transparency and the foresight to investigate these ben- ADS Securities
had pledged to financial services operate, taking control technology. For example, looking liquidity which will make blockchain an
that is not blockchain. The cur- efits properly, rather than simply out-
use technology to
accelerate national rent expectation is that the gov- from governments, politicians and leaders, at bitcoin, investors hoarding the essential part of the financial services world. lawing or constraining crypto trading, For more information please visit
development ernment will come up with some- and putting it in the hands of the masses, coins – typically the first movers – and “History tells us that revolutions do not which will drive the best results for www.adss.com
and growth, thing like a tax, which would be can this be achieved with no judicial or institutionalised miners using huge cancel all rules, they reset them, and this is their markets.
promising to make
more acceptable. That would be social controls? computing power have become the de what has to happen with crypto.” The speed and scalability of block-
government more
transparent and 02 much better than seeing a parallel chain cannot yet meet the demands
innovative crypto black economy.” of most modern financial systems,
04 CRYPTOCURRENCIES
INDIA
Crackdown on
crypto companies
Once a front runner in cryptocurrencies and crypto exchanges,
India has now sought to shut down trading
BURHAN WAZIR
E
ver since he was elected in
2014, India’s prime minister
Narendra Modi has pledged
to use technology to acceler-
ate national development and boost
growth. Promising to make govern-
ment more transparent and innova-
tive, Mr Modi says he will overhaul
healthcare, banking and govern-
ment services.
He has already announced that
India is partnering with Google
to bring wifi to 500 railway sta-
tions across the country. He also
says he will aggressively expand
the nation’s broadband network to
600,000 villages.
But the Indian government has
struck a more cautious tone when
faced with the often tumultu-
ous rise of cryptocurrencies and
crypto exchanges. In recent years,
India has become a regional leader
for cryptocurrencies and trading
exchanges. According to industry
figures, in May 2017 India accounted
for almost 10 per cent of all global
cryptocurrency trades.
In April, the Reserve Bank of
India abruptly introduced meas-
ures to halt the flow of digital
funds into the banking sector. The
bank said all regulated financial
companies must end services to
individuals or businesses dealing
with bitcoin and other cryptocur-
rencies using blockchain technol-
ogy within 90 days.
The new rules, which come into
effect on July 5, effectively bar
traders and investors from using
India’s regulated banking system
to buy or sell virtual currencies
for rupees online. Facing a pos-
sible legal challenge, the central
bank later appeared to concede
that its ban was not based on
detailed research.
The Indian government’s caution
mirrors that of a number of oth-
ers around the world. Nations such
as Algeria and Bangladesh have all
prohibited the use of cryptocur-
rencies and last September China
moved to shut down all cryptocur-
rency exchanges.
India’s decision coincided with a
ruling by neighbouring Pakistan’s
central bank that cryptocur-
rencies were no longer deemed
legal in the Islamic republic. The
State Bank of Pakistan told other
banks and financial services pro-
viders to refuse any customers
seeking cryptocurrency transac-
tions. The bank also said those
using cryptocurrencies to transfer
money outside of Pakistan could
be prosecuted.
RACONTEUR.NET 05
Commercial feature
Kuni Takahashi/Bloomberg via Getty Images
Yet it wasn’t until recently that the representing CoinDelta cryptocur-
Indian government began to issue rency exchange in challenging the
warnings on a sector which is esti- Indian central bank’s decision. Mr
mated to have added 200,000 new Rastogi warns that a ban isolating
users each month. Last December, cryptocurrencies from the banking
Tracking
the Indian finance ministry sector would either push companies
described digital currency invest- abroad or underground into an ille-
ments as being like “Ponzi schemes” gal “dark” sector.
and urged caution when investing in “The promising companies are
progress in
cryptocurrencies. The ministry said going to flee outside the country,” he
investors transacting with digital says. “Worse is that the Reserve Bank
currencies were doing so “entirely at of India (RBI) directive comes in
their risk and should best avoid par- advance of a decision by the govern-
cryptocurrencies
ticipating therein”. ment on the legality of and regula-
In addition, the finance ministry tory mechanics for cryptocurrencies.
highlighted possible national secu- If the government or the court were
rity threats and said the nature of to decide in favour of crypto busi-
encrypted transactions meant they nesses eventually, the RBI directive
could be used for activities such as would have by then taken a complete
“terror-funding, smuggling, drug toll on the businesses, innovation
trafficking and other money laun-
dering acts”.
and wealth in cryptos that has been
created so far in the country.”
Evolution of cryptocurrencies and blockchain is close
Crypto specialists have viewed to a tipping point as central banks and governments
the Indian central bank’s ruling as
a glaring example of bureaucratic are now starting to recognise the opportunities
overreach that could stifle innova-
tion. “The way I see it, the Indian
government, or the bureaucratic Crypto specialists
B
system, is not really proficient in have viewed the
understanding new technological itcoin and blockchain have and blockchain as they realise the scale bought by inexperienced investors who big financial centres have historically but this is bound to change. With
advancements like cryptocurren- Indian central evoked mixed reactions for of the opportunities. have never previously owned a stock, been driven to adapt by new products, the volume of financial and human
cies or blockchain,” says Awanish bank’s ruling as a many years now. After it was This has the potential to completely bond or currency. In other words, the technology and shifts in demand. The resources now being pumped into
Rajan, co-founder and chief execu- first unveiled in 2009, bitcoin reshape traditional financial markets as technology on which the financial ser- advent of electronic communications, the technology, it is advancing very
tive of www.idap.io, a forthcoming glaring example was widely dismissed as a specula- we know them. Cryptocurrencies bring vices system could one day come to for example, allowed hedge funds quickly. The priority for main centre
crypto-derivatives exchange, regis-
tered in Estonia, preparing an initial
of bureaucratic tive bubble that was bound to burst
and cryptocurrencies have remained
new technologies, new markets and
new systems, driven from the ground
depend is owned not by central banks,
governments or professional investors,
to move from the City of London to
Mayfair and from Wall Street to Boston.
market practitioners and regulators
should be to recognise that block-
coin offering. overreach that could largely a fringe activity since then. up by market practitioners and indi- but rather by members of the public. The building of Canary Wharf in London chain is here to stay and looks set
Mr Rajan says Indian regula- Meanwhile, broader attention has vidual investors rather than by central The financial services sector is well and most recently Hudson Yards in New to become an integral part of main-
tors were seeking top-down con-
stifle innovation focused on the opportunities that banks or governments. If cryptos con- accustomed to change, of course, and York has further dispersed historically stream trading. If they do not adapt
trol over cryptocurrencies and might be derived from the underlying tinue to evolve at the current pace, famous financial centres. these developments, they will find
exchanges. “They are not pro- distributed ledger technology. China this could bring about a revolution in The development of blockchain and smaller, more dynamic financial cen-
01 ficient in understanding how it and India are so against the new tech- the way financial services are deliv- cryptocurrencies could be even more tres stealing a march.
works and they couldn’t see what CoinDelta founder Shubham nology they have decided to impose ered and consumed. The digitisation of disruptive, further diminishing the role As with every innovation, there is a
was happening in the crypto Yadav says the ruling had a big complete bans on crypto trading. assets has the potential to democratise of New York, London, Tokyo, Shanghai tipping point, a switch in sentiment
space. They felt they were los- impact on business; new users on In more recent months, however, often closed investment areas, giving and Singapore as leading financial cen- and understanding that leads to bigger
ing their authority over the sys- the trading platform had fallen countries such as Japan have proac- the general public access to markets tres. Many of these cities have retained changes. We believe that tipping point
tem and didn’t really understand from a peak of between 7,000 and tively embraced digital currencies, and products in a way which has not their pre-eminence because of the for crypto is very close. When major
either blockchain or cryptocur-
rencies. My suggestion was to fol-
8,000 a day to just 50 to 60 after
the ruling. “We are an exchange,
and the same commercial banks and
investment banks that had previously
happened before.
The bulk of investment in blockchain
When major investment banks liquidity they manage and the high
concentration of banks, technology
investment banks are allocating sub-
stantial resources to develop their
low a country which has taken so it has impacted us on a huge decried crypto as the mother of all and digital currencies so far has come are allocating substantial and buy-side firms in those areas. own blockchains, we know things are
resources to develop their own
a good lead on this, for example scale,” he says. “The RBI’s deci- bubbles are discreetly realigning their not from the official sector, but rather Blockchain has no such physical con- changing. The market volatility is now
Japan. But that hasn’t happened.” sion also has a lot of other unin- positions. Driven by recent volatility through unconventional channels such straints when it comes to liquidity or understood and investors are looking
Yet even as India prepares for tended consequences. When the and the gradual transition of crypto as crowdfunding. Initial coin offerings blockchains, we know things technology. The beauty of a distributed past the market fluctuations at long-
the new rules to come into effect, a RBI asks banks to shut down the into a professional asset class, many generate the capital to develop new ledger is that it can be accessed and term value – and the official sector is
number of companies have chosen accounts of businesses like ours, are now actively investing in bitcoin crypto assets, but they are often being are changing amended anywhere, with no need to now doing the same.
to fight the central bank’s decision they are effectively asking them concentrate around existing financial
in court. Other exchanges, such as not to support companies like centres. Each chain is equivalent to a
Unocoin, are considering moving us. We use these accounts for our new financial ecosystem and investors
abroad to another country. operating expenses and salaries. are closely watching the space to iden-
Revolution not anarchy
“The innovation that has hap- This means we have to think about tify which will endure for the long term.
pened in the Indian crypto-ex- banking elsewhere.” “Anti-establishment, libertarian and “The answer is of course no. This does facto major players influencing market From complicated investments to retail
change space over the last couple of The central bank has said it is revolutionary – all words which have been not mean that the same types of regulation prices. This is already a broken model. operations, it offers a new transparent,
years will be stifled,” says Anirudh exploring the possibility of creat- used to describe cryptocurrencies and which are applied to fiat currencies need to “There is also a finite cap of 21 million accessible way of managing data.
Rastogi, managing partner at TRA ing a digital currency of its own and the rise of blockchain technology.  From be in place. However, like water cascading bitcoins – at this stage about 17 million Up until now, main centre regulators
Law, a Delhi legal firm. TRA Law is Indian state entities have already the moment it was formed through to down a hill, its power and purpose can coins have been mined – so this risk of have largely focused their attention
shown interest in using blockchain the meteoric growth in the people and only be captured and controlled when it is concentration means bitcoin cannot be on concerns over fraud and market
technology to tackle challenges firms associated with crypto, the message channelled and directed.  compared to any other market; it’s efficiency manipulation associated with crypto-
Paul Miller/Bloomberg via Getty Images
01 ranging from land registration to has always been that this will change the “We are now in a period of its and attractiveness are compromised. currencies and initial coin offerings.
The Reserve Bank of managing healthcare records. world. And it will do this without the need development when as many new “We have to hope the emergence of new This is, of course, absolutely right, and
India has conceded
that the ban
Critics hope the government will for government intervention or regulation,” ‘regulatory’ bodies are being formed as new tokens and market participants, typically they are aware of the potential oppor-
announced in April quickly relax the banking ban on says Philippe Ghanem, vice chairman and coins issued. This tells me that there has to smaller but more numerous individual tunities provided by blockchain to
was not based on cryptocurrencies in favour of a chief executive of ADS Securities. be governance. Systems are needed which investors, speculators and more traditional promote greater transparency, secu-
detailed research “It is the intellectual freedom which has set the boundaries and rules required to institutional players, will take a bigger market
tax. “They talk about blockchain rity and ease of access for a broader
without really understanding how created the phenomenon we see today; protect companies and individuals.  role. Ultimately, it is the spread of the spectrum of investors and traders. In Philippe Ghanem
02
Prime minister it works,” says Mr Rajan. “You can however, can it really be unregulated? If “However, no central bank or entity technology and increased market access, the long run, it is those agencies with Vice chairman and chief executive
Narendra Modi streamline your governing, but it is setting out to change the way that is controlling distributed ledger government regulation, transparency and the foresight to investigate these ben- ADS Securities
had pledged to financial services operate, taking control technology. For example, looking liquidity which will make blockchain an
that is not blockchain. The cur- efits properly, rather than simply out-
use technology to
accelerate national rent expectation is that the gov- from governments, politicians and leaders, at bitcoin, investors hoarding the essential part of the financial services world. lawing or constraining crypto trading, For more information please visit
development ernment will come up with some- and putting it in the hands of the masses, coins – typically the first movers – and “History tells us that revolutions do not which will drive the best results for www.adss.com
and growth, thing like a tax, which would be can this be achieved with no judicial or institutionalised miners using huge cancel all rules, they reset them, and this is their markets.
promising to make
more acceptable. That would be social controls? computing power have become the de what has to happen with crypto.” The speed and scalability of block-
government more
transparent and 02 much better than seeing a parallel chain cannot yet meet the demands
innovative crypto black economy.” of most modern financial systems,
06 CRYPTOCURRENCIES
SOCIAL BENEFIT
Money power
to the people
– not pizza
Although cryptocurrencies may be
viewed by some as primarily a speculative
investment opportunity, they have a
possibly greater, social value
OLIVER PICKUP
B
itcoin Pizza Day, celebrated
on May 22, commemorates
the first real-world crypto-
currency transaction, com-
pleted on that date in 2010. Laszlo
Hanyecz exchanged 10,000 bitcoins
– then the equivalent of $80 and
now worth around $70 million – for
two large pizzas.
Facilitating the purchase of an
Italian cheese-and-tomato-based
food staple is unlikely to have
been what Satoshi Nakamoto had
in mind when publishing the bit-
coin white paper in October 2008,
before mining the genesis block
and launching the network the fol-
lowing January.
However, it’s impossible to know
for sure, because Nakamoto has
remained both anonymous and
silent since establishing the orig-
inal cryptocurrency, which has
now spawned more than 1,500
others. In the eight years since
Mr Hanyecz’s pizza purchase, the
value of cryptos, both financially
and in terms of benefitting society,
has expanded exponentially.
Even now, at this relatively early
stage of development – some call it
“the 1994 of the internet” –there is a
multitude of examples, all over the
globe, showcasing how cryptos can
be a force for betterment.
“We are already seeing social-im-
pact solutions that otherwise
wouldn’t be possible without cryp-
tocurrency technology, such as
expediting the sustainable transfer of
aid and providing secure government
services,” says Doug Galen, lecturer at
Stanford Graduate School of Business
and chief executive of RippleWorks,
an organisation that pairs startup
and technology experts with social
ventures around the world.
“When applied in the right use-
cases, we may well see cryptocurrency
do to certain industries what the inter-
net has done to how we access infor-
mation or what mobile technology did
to how we connect people.” And that
may be what the people behind bitcoin
were striving for.
In Nakamoto’s white paper,
Bitcoin: A peer-to-peer electronic
cash system, the author proposes
“a purely peer-to-peer version of
electronic cash would allow online
payments to be sent directly from
one party to another without going
through a financial institution”.
The white paper posits: “No mech-
anism exists to make payments over
a communications channel without
a trusted party. What is needed is an
electronic payment system based
on cryptographic proof instead of
trust, allowing any two willing par-
ties to transact directly with each
other without the need for a trusted
third party.
“Transactions that are compu-
tationally impractical to reverse
would protect sellers from fraud
and routine escrow mechanisms
could easily be implemented to
protect buyers.”
Bitcoin and more advanced
cryptos have solved a number of
the issues outlined by Nakamoto,
thus causing even sceptics to con-
cede that this form of digital cur-
rency could well be the future
of money. With an inbuilt safe-
guard against fraud and false
identity, thanks to the blockchain
ledger technology underpinning
bitcoin, greater transparency,
plus lower fees for cross-coun-
try transactions, and by being
free from government interfer-
ence, cryptos have begun trans-
forming payment systems in
emerging markets.
Moreover, it is estimated there
are approximately 2.2 billion indi-
viduals with internet access, via
smartphones and similar devices,
but without access to a traditional
financial exchange, making them
prime targets for the cryptocur-
rency market.
Ian Bradbury, chief technical
officer of financial services at Fujitsu,
says: “The most obvious developing
social value use-case for a ‘stored
value’ solution is in the area of iden-
tity. Although you may not see iden-
tity as a cryptocurrency, it certainly
has significant value to an own-
ing individual and it is frequently
shared with others in a controlled
way to gain access to many services,
for example border control, right to
work, education, healthcare, finan-
cial services, benefits and many oth-
ers. Now, very basic forms of identity
management are being implemented
to help refugees, for instance.”
Jimmy Nguyen, chief executive
Cryptocurrency
will achieve greater
financial inclusion for
people in developing
countries
of London-headquartered crypto
specialists nChain, continues this
theme. “Cryptocurrency will achieve
greater financial inclusion for peo-
ple in developing countries,” he says.
“They have large unbanked popula-
tions with limited access to financial
services because they cannot easily
save, store or send money. But with a
digital wallet on their mobile phone,
‘the unbankables’ can participate in
the digital financial world.
“They can electronically save and
send cryptos anywhere in the world
for mere pennies, rather than pay-
ing money remittance fees that can
cost up to 8 per cent of the transac-
tion amount, as well as buy goods
and services in digital commerce.”
Five years ago, more than a third
of Kenyans signed up for a bitcoin
wallet offered by the revolution-
ary mobile phone-based money
transfer, financing and micro-fi-
nancing service M-Pesa (pesa is
Swahili for money). Further, accord-
ing to a 2017 Citibank report, the
founding cryptocurrency makes
up more than 2 per cent of the
African country’s gross domestic
product (GDP).
Kenya is fifth in that list, two places
behind Nigeria (3.5 per cent), with
Russia top on 5 per cent. By compar-
ison, America’s market share of bit-
coin as a percentage of GDP is only
0.17 per cent. But, even though those
emerging markets are unburdened
by the legacy of creaking finan-
cial systems, bitcoin is not the only
cryptocurrency benefiting societies.
After all, in December, blockchain.
com worked out that the average bit-
coin transaction took 78 minutes.
Unsurprisingly, newer and quicker
crypto strains have been adopted,
and developed for specific use-cases.
“Digital assets can be a real tool
for good,” enthuses Laszlo Giricz,
founder and chief executive of
Poseidon, a non-profit organisation
that engages in forest conservation.
Poseidon
The organisation uses both a smart
contract that manages the entire
life cycle of carbon credits and a
utility token (ocean) that facilitates
the efficient settlement of carbon
credit transactions.
“The cryptocurrencies that enjoy
media attention, for example bit-
coin, are more akin to commodi-
ties like gold than anything else.
Conversely, utility tokens allow
the access of specific services on
their given platform and can typ-
ically not be used for any other
purpose,” he says.
On May 1, Poseidon joined forces
with Ben & Jerry’s Scoop Store
in London. For every scoop of
ice cream bought, Ben & Jerry’s
vowed to more than rebalance
the climate impact of the process.
The consumers too have been
invited to contribute and match
the pledge. “They are taking that
opportunity and exceeding it,”
says Mr Giricz. “So far, in just
over four weeks, we conserved an
area of rainforest the size of more
than 100 tennis courts with these
micro-donations, thereby protect-
ing over 1,500 trees already.”
Elsewhere, cryptos are also ena-
bling much greater and quicker
investment in innovative pro-
jects, points out Ransu Salovaara,
chief executive of Gibraltar-based
TokenMarket. “This is next-gen-
eration crowdfunding,” he says.
“In TokenMarket’s first year,01 we
helped startups raise twice as
much money as the UK’s largest
equity crowdfunding platform
Crowdcube,” he says.
“Thanks to almost-instant cryp-
tocurrency contributions, innova-
tive startups and growth compa-
nies can access a global investor
base easier. In 2017, initial coin
offerings helped startups raise $5
billion, far exceeding venture cap-
ital in the same sector. So cryptos
empower entrepreneurs to finance
their ventures and also enable any-
one from any country to buy those
digital tokens.”
Luke Chittock, chief executive of
Kent-based philanthropic organi-
sation Lifelabs, which allocates 30
per cent of all transactions to char-
itable causes, says it is now possi-
ble to “literally follow the money
from the point of paying it into the
wallet of a charity right through to
the point when it’s paid out for its
dedicated cause”.
He explains: “Smart contracts
automatically ensure that your
money can only be spent on pre-de-
fined goods and receivers. This
builds an enormous amount of addi-
tional trust for charities and their
brands, something that is essential
in the world of philanthropy.”
Trust, transparency, inclusivity
– these, and not pizza, were surely
what Nakamoto had in mind when
inventing bitcoin almost exactly
a decade ago. Because of cryptos,
the world is a better place and the
social benefit of this global phe-
nomenon is only going to increase
with the maturity of the technol-
ogy. That calls for a celebration.
Margherita anybody?
Bitcoin comes of age
Cryptocurrencies are attracting professional and high-net-worth
investors, and they need reliable service provision
B
uying bitcoin is almost as easy
as booking a train ticket these
days. Just register with one of
the growing number of crypto-
currency exchanges, go through a few
standard compliance checks, load a
cash balance and away you go.
This ease of accessibility is no acci-
dent. The mainstay of demand for bit-
coin so far has been from retail investors
and day traders keen to dabble in this
new market, so the priority has been to
make it as easy as possible for them to
access the currency without excessive
layers of paperwork and screening.
As the cryptocurrency market
matures, however, it is attracting
interest from a wider spectrum of
investors, including professionals and
high-net-worth individuals. This is
to be welcomed as bitcoin has been
on a rollercoaster ride of volatility in
recent months and, with the increas-
ing participation of institutional trad-
ers, it offers tangible opportunities to
sophisticated investors.
Transitioning from fringe currency
to an investment asset class will be a
major change for bitcoin and other
crypto assets. Market participants
will need confidence in the regulation
$100bn
bitcoin industry
https://coinmarketcap.com/currencies/bitcoin
35%
of high-net-worth individuals
already have exposure to
cryptocurrencies or will have
by the end of 2018
: http://www.internationalinvestment.net/
cryptocurrencies/survey-reveals-35-of-hnwis-are-
investing-in-cryptocurrencies/
Commercial feature
and security of the market, while also
developing an understanding of the
changeable nature and technical fac-
tors that drive currencies.
At CoinCorner, we have been con-
scious of the need to address security
concerns, something that has been
a priority since we first launched in
July 2014. Our clients can access their
assets at any time and can be assured
that these are kept securely in cold
storage while not required.
We are based in the Isle of Man, which
is one of the safest places to live in the
world, and take every necessary step
to assuage concerns over fraud and
security. The Isle of Man has become
an active centre for bitcoin trad-
ing and one of the first jurisdictions
in the world to introduce legislation
for cryptocurrencies.
While there was no legislation in place
when we launched, we fully expected
that this would change at some point
and carried out robust anti-money
laundering, counter-terrorist financing
and know-your-customer procedures
from day one. We worked closely with
the Isle of Man government to develop
the local crypto legislation that came
into force in 2016 and have been
registered with the Isle of Man
Financial Services Authority for the
past two years.
Proportionate regulation of the cryp-
tocurrency space is to be welcomed
and should help to facilitate its tran-
sition into a professional-grade prod-
uct, giving investors greater confidence
that this is not the wild west of financial
markets, but rather an emerging asset
class in its own right.
Volatility will also play its part in sup-
porting this transition and the fluctu-
ating price of bitcoin over the past six
months has certainly helped to bring
in new participants. There is a natu-
ral tendency across financial markets
to focus on intraday price fluctua-
tions, but it is the broader trajectory
of bitcoin over the last nine years
RACONTEUR.NET 07
Our new service,
CoinCorner
Concierge, will be
aimed specifically
at a more
sophisticated
class of investor
that should be of greater relevance in
showing its growth.
The steady appreciation in the value
of bitcoin, coupled with the rapid
development of other digital curren-
cies, highlights the rising maturity of
the market as it begins to attract a new
breed of longer-term professional.
While it is the risk and volatility of bit-
coin, and the potential for high returns,
that will draw professional investors in,
they still need reliable service provid-
ers as they experiment in trading the
product. That might range from tech-
nical support to advice on security
and regulation, and this will be just as
important for high-net-worth individ-
uals as for day traders.
Our new service, CoinCorner
Concierge, will be aimed specifically
at a more sophisticated class of inves-
tor, recognising that even if buying
£100,000 of bitcoin rather than just
£10, reliable and innovative exchanges
will be no less important.
The cryptocurrency world is evolving
fast and we are excited to be on the
cusp of its next phase of growth.
For more information please visit
coincorner.com/concierge
06 CRYPTOCURRENCIES
SOCIAL BENEFIT
Money power
to the people
– not pizza
Although cryptocurrencies may be
viewed by some as primarily a speculative
investment opportunity, they have a
possibly greater, social value
OLIVER PICKUP
B
itcoin Pizza Day, celebrated
on May 22, commemorates
the first real-world crypto-
currency transaction, com-
pleted on that date in 2010. Laszlo
Hanyecz exchanged 10,000 bitcoins
– then the equivalent of $80 and
now worth around $70 million – for
two large pizzas.
Facilitating the purchase of an
Italian cheese-and-tomato-based
food staple is unlikely to have
been what Satoshi Nakamoto had
in mind when publishing the bit-
coin white paper in October 2008,
before mining the genesis block
and launching the network the fol-
lowing January.
However, it’s impossible to know
for sure, because Nakamoto has
remained both anonymous and
silent since establishing the orig-
inal cryptocurrency, which has
now spawned more than 1,500
others. In the eight years since
Mr Hanyecz’s pizza purchase, the
value of cryptos, both financially
and in terms of benefitting society,
has expanded exponentially.
Even now, at this relatively early
stage of development – some call it
“the 1994 of the internet” –there is a
multitude of examples, all over the
globe, showcasing how cryptos can
be a force for betterment.
“We are already seeing social-im-
pact solutions that otherwise
wouldn’t be possible without cryp-
tocurrency technology, such as
expediting the sustainable transfer of
aid and providing secure government
services,” says Doug Galen, lecturer at
Stanford Graduate School of Business
and chief executive of RippleWorks,
an organisation that pairs startup
and technology experts with social
ventures around the world.
“When applied in the right use-
cases, we may well see cryptocurrency
do to certain industries what the inter-
net has done to how we access infor-
mation or what mobile technology did
to how we connect people.” And that
may be what the people behind bitcoin
were striving for.
In Nakamoto’s white paper,
Bitcoin: A peer-to-peer electronic
cash system, the author proposes
“a purely peer-to-peer version of
electronic cash would allow online
payments to be sent directly from
one party to another without going
through a financial institution”.
The white paper posits: “No mech-
anism exists to make payments over
a communications channel without
a trusted party. What is needed is an
electronic payment system based
on cryptographic proof instead of
trust, allowing any two willing par-
ties to transact directly with each
other without the need for a trusted
third party.
“Transactions that are compu-
tationally impractical to reverse
would protect sellers from fraud
and routine escrow mechanisms
could easily be implemented to
protect buyers.”
Bitcoin and more advanced
cryptos have solved a number of
the issues outlined by Nakamoto,
thus causing even sceptics to con-
cede that this form of digital cur-
rency could well be the future
of money. With an inbuilt safe-
guard against fraud and false
identity, thanks to the blockchain
ledger technology underpinning
bitcoin, greater transparency,
plus lower fees for cross-coun-
try transactions, and by being
free from government interfer-
ence, cryptos have begun trans-
forming payment systems in
emerging markets.
Moreover, it is estimated there
are approximately 2.2 billion indi-
viduals with internet access, via
smartphones and similar devices,
but without access to a traditional
financial exchange, making them
prime targets for the cryptocur-
rency market.
Ian Bradbury, chief technical
officer of financial services at Fujitsu,
says: “The most obvious developing
social value use-case for a ‘stored
value’ solution is in the area of iden-
tity. Although you may not see iden-
tity as a cryptocurrency, it certainly
has significant value to an own-
ing individual and it is frequently
shared with others in a controlled
way to gain access to many services,
for example border control, right to
work, education, healthcare, finan-
cial services, benefits and many oth-
ers. Now, very basic forms of identity
management are being implemented
to help refugees, for instance.”
Jimmy Nguyen, chief executive
Cryptocurrency
will achieve greater
financial inclusion for
people in developing
countries
of London-headquartered crypto
specialists nChain, continues this
theme. “Cryptocurrency will achieve
greater financial inclusion for peo-
ple in developing countries,” he says.
“They have large unbanked popula-
tions with limited access to financial
services because they cannot easily
save, store or send money. But with a
digital wallet on their mobile phone,
‘the unbankables’ can participate in
the digital financial world.
“They can electronically save and
send cryptos anywhere in the world
for mere pennies, rather than pay-
ing money remittance fees that can
cost up to 8 per cent of the transac-
tion amount, as well as buy goods
and services in digital commerce.”
Five years ago, more than a third
of Kenyans signed up for a bitcoin
wallet offered by the revolution-
ary mobile phone-based money
transfer, financing and micro-fi-
nancing service M-Pesa (pesa is
Swahili for money). Further, accord-
ing to a 2017 Citibank report, the
founding cryptocurrency makes
up more than 2 per cent of the
African country’s gross domestic
product (GDP).
Kenya is fifth in that list, two places
behind Nigeria (3.5 per cent), with
Russia top on 5 per cent. By compar-
ison, America’s market share of bit-
coin as a percentage of GDP is only
0.17 per cent. But, even though those
emerging markets are unburdened
by the legacy of creaking finan-
cial systems, bitcoin is not the only
cryptocurrency benefiting societies.
After all, in December, blockchain.
com worked out that the average bit-
coin transaction took 78 minutes.
Unsurprisingly, newer and quicker
crypto strains have been adopted,
and developed for specific use-cases.
“Digital assets can be a real tool
for good,” enthuses Laszlo Giricz,
founder and chief executive of
Poseidon, a non-profit organisation
that engages in forest conservation.
Poseidon
The organisation uses both a smart
contract that manages the entire
life cycle of carbon credits and a
utility token (ocean) that facilitates
the efficient settlement of carbon
credit transactions.
“The cryptocurrencies that enjoy
media attention, for example bit-
coin, are more akin to commodi-
ties like gold than anything else.
Conversely, utility tokens allow
the access of specific services on
their given platform and can typ-
ically not be used for any other
purpose,” he says.
On May 1, Poseidon joined forces
with Ben & Jerry’s Scoop Store
in London. For every scoop of
ice cream bought, Ben & Jerry’s
vowed to more than rebalance
the climate impact of the process.
The consumers too have been
invited to contribute and match
the pledge. “They are taking that
opportunity and exceeding it,”
says Mr Giricz. “So far, in just
over four weeks, we conserved an
area of rainforest the size of more
than 100 tennis courts with these
micro-donations, thereby protect-
ing over 1,500 trees already.”
Elsewhere, cryptos are also ena-
bling much greater and quicker
investment in innovative pro-
jects, points out Ransu Salovaara,
chief executive of Gibraltar-based
TokenMarket. “This is next-gen-
eration crowdfunding,” he says.
“In TokenMarket’s first year,01 we
helped startups raise twice as
much money as the UK’s largest
equity crowdfunding platform
Crowdcube,” he says.
“Thanks to almost-instant cryp-
tocurrency contributions, innova-
tive startups and growth compa-
nies can access a global investor
base easier. In 2017, initial coin
offerings helped startups raise $5
billion, far exceeding venture cap-
ital in the same sector. So cryptos
empower entrepreneurs to finance
their ventures and also enable any-
one from any country to buy those
digital tokens.”
Luke Chittock, chief executive of
Kent-based philanthropic organi-
sation Lifelabs, which allocates 30
per cent of all transactions to char-
itable causes, says it is now possi-
ble to “literally follow the money
from the point of paying it into the
wallet of a charity right through to
the point when it’s paid out for its
dedicated cause”.
He explains: “Smart contracts
automatically ensure that your
money can only be spent on pre-de-
fined goods and receivers. This
builds an enormous amount of addi-
tional trust for charities and their
brands, something that is essential
in the world of philanthropy.”
Trust, transparency, inclusivity
– these, and not pizza, were surely
what Nakamoto had in mind when
inventing bitcoin almost exactly
a decade ago. Because of cryptos,
the world is a better place and the
social benefit of this global phe-
nomenon is only going to increase
with the maturity of the technol-
ogy. That calls for a celebration.
Margherita anybody?
Bitcoin comes of age
Cryptocurrencies are attracting professional and high-net-worth
investors, and they need reliable service provision
B
uying bitcoin is almost as easy
as booking a train ticket these
days. Just register with one of
the growing number of crypto-
currency exchanges, go through a few
standard compliance checks, load a
cash balance and away you go.
This ease of accessibility is no acci-
dent. The mainstay of demand for bit-
coin so far has been from retail investors
and day traders keen to dabble in this
new market, so the priority has been to
make it as easy as possible for them to
access the currency without excessive
layers of paperwork and screening.
As the cryptocurrency market
matures, however, it is attracting
interest from a wider spectrum of
investors, including professionals and
high-net-worth individuals. This is
to be welcomed as bitcoin has been
on a rollercoaster ride of volatility in
recent months and, with the increas-
ing participation of institutional trad-
ers, it offers tangible opportunities to
sophisticated investors.
Transitioning from fringe currency
to an investment asset class will be a
major change for bitcoin and other
crypto assets. Market participants
will need confidence in the regulation
$100bn
bitcoin industry
https://coinmarketcap.com/currencies/bitcoin
35%
of high-net-worth individuals
already have exposure to
cryptocurrencies or will have
by the end of 2018
: http://www.internationalinvestment.net/
cryptocurrencies/survey-reveals-35-of-hnwis-are-
investing-in-cryptocurrencies/
Commercial feature
and security of the market, while also
developing an understanding of the
changeable nature and technical fac-
tors that drive currencies.
At CoinCorner, we have been con-
scious of the need to address security
concerns, something that has been
a priority since we first launched in
July 2014. Our clients can access their
assets at any time and can be assured
that these are kept securely in cold
storage while not required.
We are based in the Isle of Man, which
is one of the safest places to live in the
world, and take every necessary step
to assuage concerns over fraud and
security. The Isle of Man has become
an active centre for bitcoin trad-
ing and one of the first jurisdictions
in the world to introduce legislation
for cryptocurrencies.
While there was no legislation in place
when we launched, we fully expected
that this would change at some point
and carried out robust anti-money
laundering, counter-terrorist financing
and know-your-customer procedures
from day one. We worked closely with
the Isle of Man government to develop
the local crypto legislation that came
into force in 2016 and have been
registered with the Isle of Man
Financial Services Authority for the
past two years.
Proportionate regulation of the cryp-
tocurrency space is to be welcomed
and should help to facilitate its tran-
sition into a professional-grade prod-
uct, giving investors greater confidence
that this is not the wild west of financial
markets, but rather an emerging asset
class in its own right.
Volatility will also play its part in sup-
porting this transition and the fluctu-
ating price of bitcoin over the past six
months has certainly helped to bring
in new participants. There is a natu-
ral tendency across financial markets
to focus on intraday price fluctua-
tions, but it is the broader trajectory
of bitcoin over the last nine years
RACONTEUR.NET 07
Our new service,
CoinCorner
Concierge, will be
aimed specifically
at a more
sophisticated
class of investor
that should be of greater relevance in
showing its growth.
The steady appreciation in the value
of bitcoin, coupled with the rapid
development of other digital curren-
cies, highlights the rising maturity of
the market as it begins to attract a new
breed of longer-term professional.
While it is the risk and volatility of bit-
coin, and the potential for high returns,
that will draw professional investors in,
they still need reliable service provid-
ers as they experiment in trading the
product. That might range from tech-
nical support to advice on security
and regulation, and this will be just as
important for high-net-worth individ-
uals as for day traders.
Our new service, CoinCorner
Concierge, will be aimed specifically
at a more sophisticated class of inves-
tor, recognising that even if buying
£100,000 of bitcoin rather than just
£10, reliable and innovative exchanges
will be no less important.
The cryptocurrency world is evolving
fast and we are excited to be on the
cusp of its next phase of growth.
For more information please visit
coincorner.com/concierge
 08 CRYPTOCURRENCIES RACONTEUR.NET 09

FUTURE OF MONEY Commercial feature

Photo by picjumbo.com from Pexels

SAM SHAW

M
illennials love an experi- Several central
ence. And what could be banks are

Next-generation
more experiential than
turning up to a music fes- developing a new
tival, ditching that summer’s cap-
sule wardrobe into a minimalist
form of money

platforms
glamping pod and heading off into a known as central
field of dreams armed with nothing
but optimism? No bumbags, no fes-
bank digital
tival-friendly satchels to protect, no currency
wallets. Not physical ones, anyway.
Already embracing digital wal-
lets pre-loaded with cryptocur- A next-generation cryptocurrency platform
is offering regulation and security – with no
rency, will the next phase see us
simply donning watches, bracelets Sovereign states appear to be
or even microchips embedded into
our hands, giving a new meaning to
key to progress, alongside their
respective regulators, despite
trading fees
wave and pay? not quite agreeing on the basics,
“The more flexible industries and some countries are already

will be fi rst,” says Iqbal Gandham,
UK managing director at social
trading platform eToro. “Where
concerns exist around cash pay-
ments, yet people don’t really want
to use debit cards, these might
move to their own digital cur-
rency. I think festivals and the
music industry could be ripe for
adopting cryptocurrencies.”
More broadly, the multi-tril-
lion-dollar media and entertain-
ment sectors look optimally placed
for the uptake of cryptocurrency.
Whether it’s downloading the num-
ber-one hit from future pop princess
at work. Be it Estonia, a self-pro-
claimed digital leader or eco-
nomic powerhouse China, some-
one just needs to go first.
eToro’s Mr Gandham says: “Some
people have said by 2030 we will
have 25 or 30 per cent of world cur-
rencies replaced by bitcoin. I think
it will be far, far quicker than that.
Countries with less faith in their
governments will adopt the cur-
Festivals and other places requiring rency quicker and the more stable
low-cost transactions could be the may come a little later.”
first to adopt cryptocurrencies
Rohit Talwar, chief executive
at global futurist publisher and
consultancy Fast Future, agrees:
S
ince being launched less than
a decade ago, cryptocurren-
cies have become one of the
most disruptive creations of
the internet age. This once niche pur-
suit is slowly, but surely, becoming
noticed and adopted by key players in
the global financial ecosystem, leading
to more widespread use. Yet, much
has changed in the crypto space over
the last few years, especially in terms
of what traders expect from crypto-
currency exchanges.
Now that a number of cryptocur-
rencies are worth a great deal when
tion of crypto platforms that wants to
empower users to trade on a regulated
and secure platform, with no trading
fees. DX partnered with a world-class
matching engine, which will prevent
double-counting and fake volumes, at
the same time as offering traders cut-
ting-edge technology.
“Crypto enthusiasts shouldn’t have
to pay more than a minimal member-
ship charge to trade with their peers
and they shouldn’t have to trade in an
unregulated, unsecure environment.
The DX.Exchange interface is one that
will create a one-of-a-kind, fair trad-

Cryptos set to cash in

Blue Ivy Carter, daughter of Beyoncé “The world isn’t going to align converted to traditional fiat money, ing experience that puts the traders
and Jay-Z, or projecting a virtual on Estonia’s crypto as the global improving security is becoming an first,” says Daniel Skowronski, chief
Matisse on to your living room wall, standard. It would either have to increasingly important considera- executive of DX.
digital assets naturally lend them- be a pan-European thing, but the tion across the industry. From Indian Mr Skowronski stresses the impor-

as money loses appeal

selves to digital currency purchase.
Applied futurist Tom Cheesewright
thinks the media industry is one
example of low-hanging fruit that will
be first to adopt crypto as the norm.
“Cryptocurrency ought to be good
for anything using low-cost trans-
actions and micropayments, which
remain problematic in today’s digital
economy,” Mr Cheesewright says.
Given today’s tug of war between
advertisement or subscrip-
tion-driven revenue models, he
adds: “In publishing, most potential
traffic is walled out from accessing
the site because they have no abil-
ity to take payments of just 10p for a
particular article.”
Volatility and frictions around
cost and speed appear to the big-
gest barriers to uptake, but change
is already afoot. Bitcoin may be the
market leader, but there are more
B2B cryptos
Cryptocurrencies may
become commonplace for
low-cost transactions and
micropayments made by
consumers, but what about
business-to-business (B2B)
payments of the future? TraDove
is developing a light, fast and
trustable B2B blockchain payment
network that hopes to mitigate
many of the problems that hamper
the business payments industry.
European Commission is just way crypto exchange Coinsecure losing tance of regulation, explaining that
too behind the game, or US-led, more than $3.5 million after a theft, regulation has always been on the side
but no one is going to put their to a Japanese cryptocurrency plat- of the trader and the industry must Cryptocurrency COINS.EXCHANGE
money towards Trump’s vote form called Coincheck falling victim fully embrace legal frameworks if it is
right now. Even if the Federal to a hack that saw over $500-mil- to mature. In the absence of regula- exchange First-time buyers of cryptocurrency bought and sold using a traditional
Reserve came up with a water- lion-worth of digital currency stolen, tory structures guiding companies, it’s
DX.Exchange is may find trading platforms more fiat currency, credit or debit card,
Today’s futurists see a tomorrow tight model, there is just too the consequences of inadequate pro- difficult to see a sustainable future in complicated and unnecessary for their making the process uncomplicated
much nervousness around him tections are clear. the volatile area of digital currencies. one of the next simple buy and sell needs. In response for customers who have no previous
when cryptocurrencies dominate financial to customer demand for an easy buy- holding of digital currency and want
generation of crypto
that would put people off.” Platforms operating outside the By focusing on the complex needs
sell exchange, where no actual trading to ensure the entire purchasing
transactions big and small But by 2030 Donald Trump will be regulatory system are likely to face of traders, advanced cryptocurrency
out of office and if an Oprah Winfrey
or a George Clooney or some other
challenges going forward. Traditional
financial institutions will not be able
exchanges such as DX hope to become
a one-stop shop for cryptocurrency
platforms that wants between cryptocurrencies takes place,
the team behind DX.Exchange have
experience is protected from risks
normally associated with
such outsider is by then leader of to work closely with unregulated firms, enthusiasts all over the world. “Crypto to empower users to created Coins.Exchange (CX). Coins. the industry.
than 1,600 rival cryptos desperate operates, such as targeting the ina- consumer-based organisation to fi x
the free world, perhaps the United
States will be at the table with a
as exchanges that hope to work inside
the global financial ecosystem will
fans are a very social crowd. Word of
mouth is the best form of advertise-
trade on a regulated Exchange was designed to take the
best aspects of user experience and
“Based on the customer’s choice,
cryptocurrencies can be automatically
to take over. bility to hold personal data on the the efficiency issue in the next few more serious hand? require a robust regulatory frame- ment in the crypto space and I hope and secure platform, combine them with top-level transferred to their e-wallet and,
Distributed ledger technologies ledger. And the other cryptos will years and says it is perfectly rea- According to the International work. Equally, in such an unregulated DX will live up to their expectations,” security technology. if they do not have one, they can
Tangle and Hashgraph are vying hope maturity will help stabilise sonable that a China-based internet Monetary Fund, several central crypto space, companies with strong says Mr Skowronski. with no trading fees This new platform focuses on download the Coins.Exchange single-
to topple blockchain’s crown before price sensitivity. behemoth will dominate the crypto banks are developing a new form of and untarnished reputations will be Unclear fees for transactions and simplicity, security and ease of use. use wallet,” says Daniel Skowronski,
it has even become comfortable. Believing it should be possible for space by 2030. money known as central bank digi- highly attractive to traders. trading on exchanges can quickly hurt Cryptocurrencies can be easily chief executive of DX.
The next generation will continue any size crypto-based transaction to “I can’t see it being a Google or tal currency (CBDC). If over the next Cryptocurrency exchange DX.Ex- a trader’s profit. Users who are new
fi nessing the underlying tech- take place for a maximum 1p each, an Amazon. I think these compa- ten years we see CBDCs rolling out change is one of the next genera- to cryptocurrencies or want to invest robust functionality and unified oper-
nology on which cryptocurrency Mr Cheesewright expects a large nies are already under such regu- and replacing notes and coins, there relatively low amounts may also find ation with an Estonian EFSA licence
latory scrutiny that if they started will be an enormous boost to state the price breakdown difficult to work and a license from Cypriot regulator
to present a serious challenge to funds, reduced transaction costs, out and understand exactly how much CySEC, allowing traders to feel secure
the existing banking and mone- wider financial inclusion and tai- certain purchases or sales will cost. when buying, selling or storing crypto- DX.EXCHANGE FOR ICOs
tary infrastructure, they would lored anonymity. “Cryptocurrency traders don’t want currency, even when high volumes of
The TraDove platform uses various opening up corporate demand run up against a regulatory wall. From permitting unshackled to pay fees on every trade. What they trades are happening. Although initial coin offerings (ICOs) importantly from the comprehensive
social networking functions, such for cryptocurrencies for their No one, bar their shareholders, revelling in muddy fields to influ- do want is transparency; ‘what you see “We want the excitement around DX have only been around for a few know-your-customer and anti-money-
as endorsements and references, sales and marketing needs – a really wants to see them have encing monetary policy, the scope is what you get’,” says Mr Skowronski. to continue. That’s why our team will years, they have rapidly become laundering services available.
and deploys artificial intelligence $76-billion market, according power in yet another domain,” for cryptocurrency over the next With this in mind, DX’s model is purely never compromise on security, the a viable funding mechanism for “Token listing should be on
to connect corporate buyers to the company. he says. decade seems rather daunting. peer to peer where users can trade no-trading-fee principle and providing cryptocurrency firms. In 2017 alone, exchanges such as DX.Exchange, which
and sellers with faster discovery, “This is tremendous for “I think it is far more likely to Yet if they were designed not to be for a monthly membership fee of €10, the best technology-driven user expe- the more than 100 ICOs raised is a regulated, secure and strong
reducing the time and effort spent businesses given that they can be a JD.com or Alibaba where centrally managed, an impartial with professional traders who invest rience,” Mr Skowronski concludes. over $5 billion. However, with the technology. Reputation is key in the
by businesses on due diligence. eliminate the hassle of working those regulatory controls are observer could not help but fore- more than €50,000 paying competi- constant risk of a hack breaching crypto space, and with DX having
Founded by experts from MIT, with international banks, as less strong. They would then pro- see attempts by governments fail- tive trading fees. platform security, it is vital for any all the necessary parameters, such
LinkedIn, Facebook, Amazon and well as reduce their costs for vide a potential engine of ‘soft ing by sheer design. Partnerships After a straightforward registration For more information please visit firm considering an ICO to do their as European Union regulation and
Alibaba, with backers from the payments. This in addition to the power’ for the China government between governments, technol- on DX, when customers are asked to dx.exchange research and select a r security, this is exactly where ICO
corporate, finance and tech worlds, level of transparency afforded and we could see a China-based ogy giants and banking institu- provide some basic information, users eliable exchange. participants should list their tokens
TraDove also this year launched the to transactions thanks to the currency, crypto or otherwise, tions feel like a natural evolution, can deposit either traditional fiat cur- All participants in ICOs are set to to the public,” says DX chief executive
world’s first B2B token, BBCoin, blockchain,” the firm says. that became the de facto global with parallels drawn from the rise, rency or cryptocurrency into their benefit from DX solutions, perhaps most Daniel Skowronski.
platform for trade, rather than fall and eventual settling of the Daniel Skowronski account and start trading. Unlike com-
the dollar.” internet age. Chief executive, DX.Exchange petitors in the industry, DX pairs the
 08 CRYPTOCURRENCIES RACONTEUR.NET 09

FUTURE OF MONEY Commercial feature

Photo by picjumbo.com from Pexels

SAM SHAW

M
illennials love an experi- Several central
ence. And what could be banks are

Next-generation
more experiential than
turning up to a music fes- developing a new
tival, ditching that summer’s cap-
sule wardrobe into a minimalist
form of money

platforms
glamping pod and heading off into a known as central
field of dreams armed with nothing
but optimism? No bumbags, no fes-
bank digital
tival-friendly satchels to protect, no currency
wallets. Not physical ones, anyway.
Already embracing digital wal-
lets pre-loaded with cryptocur- A next-generation cryptocurrency platform
is offering regulation and security – with no
rency, will the next phase see us
simply donning watches, bracelets Sovereign states appear to be
or even microchips embedded into
our hands, giving a new meaning to
key to progress, alongside their
respective regulators, despite
trading fees
wave and pay? not quite agreeing on the basics,
“The more flexible industries and some countries are already

will be fi rst,” says Iqbal Gandham,
UK managing director at social
trading platform eToro. “Where
concerns exist around cash pay-
ments, yet people don’t really want
to use debit cards, these might
move to their own digital cur-
rency. I think festivals and the
music industry could be ripe for
adopting cryptocurrencies.”
More broadly, the multi-tril-
lion-dollar media and entertain-
ment sectors look optimally placed
for the uptake of cryptocurrency.
Whether it’s downloading the num-
ber-one hit from future pop princess
at work. Be it Estonia, a self-pro-
claimed digital leader or eco-
nomic powerhouse China, some-
one just needs to go first.
eToro’s Mr Gandham says: “Some
people have said by 2030 we will
have 25 or 30 per cent of world cur-
rencies replaced by bitcoin. I think
it will be far, far quicker than that.
Countries with less faith in their
governments will adopt the cur-
Festivals and other places requiring rency quicker and the more stable
low-cost transactions could be the may come a little later.”
first to adopt cryptocurrencies
Rohit Talwar, chief executive
at global futurist publisher and
consultancy Fast Future, agrees:
S
ince being launched less than
a decade ago, cryptocurren-
cies have become one of the
most disruptive creations of
the internet age. This once niche pur-
suit is slowly, but surely, becoming
noticed and adopted by key players in
the global financial ecosystem, leading
to more widespread use. Yet, much
has changed in the crypto space over
the last few years, especially in terms
of what traders expect from crypto-
currency exchanges.
Now that a number of cryptocur-
rencies are worth a great deal when
tion of crypto platforms that wants to
empower users to trade on a regulated
and secure platform, with no trading
fees. DX partnered with a world-class
matching engine, which will prevent
double-counting and fake volumes, at
the same time as offering traders cut-
ting-edge technology.
“Crypto enthusiasts shouldn’t have
to pay more than a minimal member-
ship charge to trade with their peers
and they shouldn’t have to trade in an
unregulated, unsecure environment.
The DX.Exchange interface is one that
will create a one-of-a-kind, fair trad-

Cryptos set to cash in

Blue Ivy Carter, daughter of Beyoncé “The world isn’t going to align converted to traditional fiat money, ing experience that puts the traders
and Jay-Z, or projecting a virtual on Estonia’s crypto as the global improving security is becoming an first,” says Daniel Skowronski, chief
Matisse on to your living room wall, standard. It would either have to increasingly important considera- executive of DX.
digital assets naturally lend them- be a pan-European thing, but the tion across the industry. From Indian Mr Skowronski stresses the impor-

as money loses appeal

selves to digital currency purchase.
Applied futurist Tom Cheesewright
thinks the media industry is one
example of low-hanging fruit that will
be first to adopt crypto as the norm.
“Cryptocurrency ought to be good
for anything using low-cost trans-
actions and micropayments, which
remain problematic in today’s digital
economy,” Mr Cheesewright says.
Given today’s tug of war between
advertisement or subscrip-
tion-driven revenue models, he
adds: “In publishing, most potential
traffic is walled out from accessing
the site because they have no abil-
ity to take payments of just 10p for a
particular article.”
Volatility and frictions around
cost and speed appear to the big-
gest barriers to uptake, but change
is already afoot. Bitcoin may be the
market leader, but there are more
B2B cryptos
Cryptocurrencies may
become commonplace for
low-cost transactions and
micropayments made by
consumers, but what about
business-to-business (B2B)
payments of the future? TraDove
is developing a light, fast and
trustable B2B blockchain payment
network that hopes to mitigate
many of the problems that hamper
the business payments industry.
European Commission is just way crypto exchange Coinsecure losing tance of regulation, explaining that
too behind the game, or US-led, more than $3.5 million after a theft, regulation has always been on the side
but no one is going to put their to a Japanese cryptocurrency plat- of the trader and the industry must Cryptocurrency COINS.EXCHANGE
money towards Trump’s vote form called Coincheck falling victim fully embrace legal frameworks if it is
right now. Even if the Federal to a hack that saw over $500-mil- to mature. In the absence of regula- exchange First-time buyers of cryptocurrency bought and sold using a traditional
Reserve came up with a water- lion-worth of digital currency stolen, tory structures guiding companies, it’s
DX.Exchange is may find trading platforms more fiat currency, credit or debit card,
Today’s futurists see a tomorrow tight model, there is just too the consequences of inadequate pro- difficult to see a sustainable future in complicated and unnecessary for their making the process uncomplicated
much nervousness around him tections are clear. the volatile area of digital currencies. one of the next simple buy and sell needs. In response for customers who have no previous
when cryptocurrencies dominate financial to customer demand for an easy buy- holding of digital currency and want
generation of crypto
that would put people off.” Platforms operating outside the By focusing on the complex needs
sell exchange, where no actual trading to ensure the entire purchasing
transactions big and small But by 2030 Donald Trump will be regulatory system are likely to face of traders, advanced cryptocurrency
out of office and if an Oprah Winfrey
or a George Clooney or some other
challenges going forward. Traditional
financial institutions will not be able
exchanges such as DX hope to become
a one-stop shop for cryptocurrency
platforms that wants between cryptocurrencies takes place,
the team behind DX.Exchange have
experience is protected from risks
normally associated with
such outsider is by then leader of to work closely with unregulated firms, enthusiasts all over the world. “Crypto to empower users to created Coins.Exchange (CX). Coins. the industry.
than 1,600 rival cryptos desperate operates, such as targeting the ina- consumer-based organisation to fi x
the free world, perhaps the United
States will be at the table with a
as exchanges that hope to work inside
the global financial ecosystem will
fans are a very social crowd. Word of
mouth is the best form of advertise-
trade on a regulated Exchange was designed to take the
best aspects of user experience and
“Based on the customer’s choice,
cryptocurrencies can be automatically
to take over. bility to hold personal data on the the efficiency issue in the next few more serious hand? require a robust regulatory frame- ment in the crypto space and I hope and secure platform, combine them with top-level transferred to their e-wallet and,
Distributed ledger technologies ledger. And the other cryptos will years and says it is perfectly rea- According to the International work. Equally, in such an unregulated DX will live up to their expectations,” security technology. if they do not have one, they can
Tangle and Hashgraph are vying hope maturity will help stabilise sonable that a China-based internet Monetary Fund, several central crypto space, companies with strong says Mr Skowronski. with no trading fees This new platform focuses on download the Coins.Exchange single-
to topple blockchain’s crown before price sensitivity. behemoth will dominate the crypto banks are developing a new form of and untarnished reputations will be Unclear fees for transactions and simplicity, security and ease of use. use wallet,” says Daniel Skowronski,
it has even become comfortable. Believing it should be possible for space by 2030. money known as central bank digi- highly attractive to traders. trading on exchanges can quickly hurt Cryptocurrencies can be easily chief executive of DX.
The next generation will continue any size crypto-based transaction to “I can’t see it being a Google or tal currency (CBDC). If over the next Cryptocurrency exchange DX.Ex- a trader’s profit. Users who are new
fi nessing the underlying tech- take place for a maximum 1p each, an Amazon. I think these compa- ten years we see CBDCs rolling out change is one of the next genera- to cryptocurrencies or want to invest robust functionality and unified oper-
nology on which cryptocurrency Mr Cheesewright expects a large nies are already under such regu- and replacing notes and coins, there relatively low amounts may also find ation with an Estonian EFSA licence
latory scrutiny that if they started will be an enormous boost to state the price breakdown difficult to work and a license from Cypriot regulator
to present a serious challenge to funds, reduced transaction costs, out and understand exactly how much CySEC, allowing traders to feel secure
the existing banking and mone- wider financial inclusion and tai- certain purchases or sales will cost. when buying, selling or storing crypto- DX.EXCHANGE FOR ICOs
tary infrastructure, they would lored anonymity. “Cryptocurrency traders don’t want currency, even when high volumes of
The TraDove platform uses various opening up corporate demand run up against a regulatory wall. From permitting unshackled to pay fees on every trade. What they trades are happening. Although initial coin offerings (ICOs) importantly from the comprehensive
social networking functions, such for cryptocurrencies for their No one, bar their shareholders, revelling in muddy fields to influ- do want is transparency; ‘what you see “We want the excitement around DX have only been around for a few know-your-customer and anti-money-
as endorsements and references, sales and marketing needs – a really wants to see them have encing monetary policy, the scope is what you get’,” says Mr Skowronski. to continue. That’s why our team will years, they have rapidly become laundering services available.
and deploys artificial intelligence $76-billion market, according power in yet another domain,” for cryptocurrency over the next With this in mind, DX’s model is purely never compromise on security, the a viable funding mechanism for “Token listing should be on
to connect corporate buyers to the company. he says. decade seems rather daunting. peer to peer where users can trade no-trading-fee principle and providing cryptocurrency firms. In 2017 alone, exchanges such as DX.Exchange, which
and sellers with faster discovery, “This is tremendous for “I think it is far more likely to Yet if they were designed not to be for a monthly membership fee of €10, the best technology-driven user expe- the more than 100 ICOs raised is a regulated, secure and strong
reducing the time and effort spent businesses given that they can be a JD.com or Alibaba where centrally managed, an impartial with professional traders who invest rience,” Mr Skowronski concludes. over $5 billion. However, with the technology. Reputation is key in the
by businesses on due diligence. eliminate the hassle of working those regulatory controls are observer could not help but fore- more than €50,000 paying competi- constant risk of a hack breaching crypto space, and with DX having
Founded by experts from MIT, with international banks, as less strong. They would then pro- see attempts by governments fail- tive trading fees. platform security, it is vital for any all the necessary parameters, such
LinkedIn, Facebook, Amazon and well as reduce their costs for vide a potential engine of ‘soft ing by sheer design. Partnerships After a straightforward registration For more information please visit firm considering an ICO to do their as European Union regulation and
Alibaba, with backers from the payments. This in addition to the power’ for the China government between governments, technol- on DX, when customers are asked to dx.exchange research and select a r security, this is exactly where ICO
corporate, finance and tech worlds, level of transparency afforded and we could see a China-based ogy giants and banking institu- provide some basic information, users eliable exchange. participants should list their tokens
TraDove also this year launched the to transactions thanks to the currency, crypto or otherwise, tions feel like a natural evolution, can deposit either traditional fiat cur- All participants in ICOs are set to to the public,” says DX chief executive
world’s first B2B token, BBCoin, blockchain,” the firm says. that became the de facto global with parallels drawn from the rise, rency or cryptocurrency into their benefit from DX solutions, perhaps most Daniel Skowronski.
platform for trade, rather than fall and eventual settling of the Daniel Skowronski account and start trading. Unlike com-
the dollar.” internet age. Chief executive, DX.Exchange petitors in the industry, DX pairs the
 10 CRYPTOCURRENCIES RACONTEUR.NET 11

Commercial feature INITIAL COIN OFFERINGS

What investors use to learn more about token/ICO projects

ZEN
ticker symbol
Blockchain media sites

White papers 63%

82%

$100m
Reddit 62%

Twitter 39%

market capitalisation
GitHub 29%

21m ZEN
Crypto hedge funds 10%

Let’s offer LinkedIn

Slack channels 1%
10%

a safer way
maximum supply

4m+ ZEN
ICO intentions

to invest
Have you taken part in an ICO and if so what have you done with your ICO tokens?

circulating supply

49% 39% 11% 10% 7% 4%

An urgent need remains to safeguard

Cryptos need core changes Stone. “It’s going to be a huge project, crypto, create an app or fork; it’s com- cryptocurrency launches and fundraising Am still Sold them
but the first company to make crypto and pletely open,” says Mr Stone.
legacy banking work well together is likely As the cryptocurrency world pushes from cash-grabbing scammers Have never
taken part
holding all
of my tokens
Sold them
into bitcoin
Sold them
into ether
into other
tokens
Sold them
into fiat

to work for everyone

to be the first to win mass adoption.” for simpler, accessible and trusted
He sees cryptocurrencies delivering on offerings, the potential for delivery on CoinDesk 2018

the original vision of making the world a this goal is now highly evident.
better place, by bringing banking solu-
tions to millions more people and intro- To find out more about ZenCash and stunt, he says: “That’s crazy. Client is well within the remit of HM
ducing personal financial stability to how it is simplifying cryptocurrencies DAVID COWAN funds should not be touched by Treasury. Based on our analysis, this most valuable coin measured

Cryptocurrencies have a powerful specialist investor base, but lack some of the most economically unstable
regions of the world. “The core thing to
mainstream consumer and business adoption. To succeed they need to be remember is that cryptocurrencies are
T
for all to use please visit zencash.com
or follow @zencashofficial
here is little doubt that ini-
tial coin offerings (ICOs)
companies. The use of funds should could be achieved relatively easily,
Case study
Ripple
by circulating supply market
be clearly stated; everything should without the need for primary legisla- capitalisation.
be made transparent in the white tion, and would have a huge impact, Ripple highlights the

easier to use, truly trusted and integrated with traditional banking systems a permissionless system; you don’t need
to be allowed by a government or a com-
promote innovation. Risk
and entrepreneurship have
paper. Cryptocurrencies are a two-
way communication between com-
both in reducing consumer risk and
improving industry standards.
Using the Ripple blockchain,
banks can send money
regulatory question of
classification. Cryptocurrency
pany to operate. Anyone can jump into always gone hand in hand, and ICOs pany and investor. “This is an approach which is internationally and use the prices have hitherto been
offer an exciting way for ventures “I am concerned when I hear regu- already working well in other coun- XRP token to square up highly correlated with bitcoin.

C
onsumers and companies are
taking an active interest in
cryptocurrencies, but there
is clearly a long way to go
before their eventual role in personal
and business finance is fully realised.
To some degree, a lack of broader
awareness of what cryptocurrencies
have to offer is holding the industry
back. But so too is a lack of joined up
thinking within some projects.
“Very few of the 2,000 or so crypto-
currencies operating have a truly busi-
ness-like operational structure and
a hierarchy that ensures they make
good strategic decisions,” says Rowan
Stone, director of business develop-
ment for cryptocurrency ZenCash. “All
these digital currencies are still in the
and clunky for many to use. People are
starting to realise that by fixing this we
can make traditional finance efficient.”
ZenCash is in the process of simplifying
usage of its products and core currency,
but it also has a broader vision. Work is
taking place to create an Apple App Store-
like platform that is simple to use and acts
as a whole ecosystem in itself. Companies
will be able to create their own apps with
any link to cryptocurrency and blockchain
technology, from real estate to informa-
tion storage and analysis.
For any cryptocurrency, when a truly
consumer-like interface like this is cre-
ated, mass adoption and institutional
investment could follow. But Mr Stone
says the industry also needs to tackle
how it is perceived by investors.
vision and owns a controlling stake in
a select group of the largest crypto-
currency firms. This opens up access
to institutional capital, while offering
other investors reassurance about the
quality of opportunity.
In addition, the industry needs regu-
latory acceptance. For now, the cryp-
tocurrency world remains relatively
unregulated and misunderstood, but
steps are being taken to make it less
risky and considerably more transpar-
ent. Mr Stone says he would welcome
any “sensible regulation that doesn’t
stifle growth”, adding: “Rather than
resisting regulation, which many
projects are doing, we are welcoming
open and honest conversation; with-
out it there will be broad-brush regula-
Experience creates strength
Despite having experienced
some significant setbacks and
a bumpy ride in ZenCash’s
short history, director
Rowan Stone remains
optimistic about the future
for cryptocurrencies. “We
become stronger and better
from our experiences,” he
says. “We’re now anti-fragile.”
Shortly after launch in May
2017, a ZenCash developer
attempted to bring down the
project following a coding
error. The situation resulted in
a criminal investigation and the
50 people. Not long after, the
cryptocurrency market crashed
and so did the value of the
company’s currency. Reserves
were substantial and well
organised but, nonetheless, it
came close to the wire.
Support from the Digital
Currency Group proved a timely
and important intervention.
Its backing gave the company
valuable credibility and access
to new investors, and led to its
entry into more online wallets,
exchanges and websites.
In the first half of 2018,
to raise money and for investors to
speculate. ICOs attract early-adop-
ters and operate creatively like a
crowdfunding exercise. However,
they are also unregulated, allowing
startups to bypass the rigorous and
well-regulated capital-raising pro-
cess in established markets.
This gives the unscrupulous a
platform for scamming and the non-
profit Anti-Phishing Working Group
estimates that about $1.2 billion in
cryptocurrencies has been stolen
since early-2017. Some say ICOs are
the wild west, susceptible to fraud
because not all exchanges actively
pursue scammers and wild fluctua-
tions in price swings inherent in the
market make it easy to mask artifi-
cial price manipulations.
lators say they regard cryptocurrency
and bitcoin as a threat. Self-regulation
will come and in many ways it is ideal
for innovation, but there are always
those who will not be compliant, so
we need to have a Europe-wide frame-
work to protect the basics and create
standardisation. However, we should
not kill innovation.”
CryptoUK was formed in February
by seven of the largest cryptocurrency
companies joining forces to promote
self-regulation within the UK crypto
industry. The association urges regu-
lators to focus on exchanges, brokers
and trading platforms rather than the
cryptocurrencies themselves, and
says HM Treasury should grant the
Financial Conduct Authority (FCA)
new permissions or licences to govern
tries, which are now taking the lead
over the UK, for example in Japan
and Gibraltar.” Guidelines from the
Centre for Rule-Making Strategies at
Tama University in Japan state that
ICO projects should be clear on dis-
tribution of funds, rules for tracking
the progress, the identity of buyers
and restrict insider trading.
Bans blocking exchanges and one-
size-fits-all approaches can stifle
innovation, and there is much sup-
port for focusing on a more sophis-
ticated use-approach. One use
is the enterprise use as a liquid-
ity tool for financial institutions;
another would address consumer
risks while enabling enterprise use.
For virtual currency uses, risks can
be addressed through a licensing
balances almost instantly.
What typically took days in the
past is now accomplished in
four seconds.
Based in San Francisco, Ripple
partners with over 100 banks,
with 75 more in the pipeline.
Ripple has made their protocol
open, encouraging developers
to build on top of their platform
and leverage their blockchain.
Accelerators focused
exclusively on products using
the Ripple protocol, such as
CrossCoin, have emerged to
further enhance this process.
Ripple is currently the third
However, Ripple believes this
could end soon as markets start
to acknowledge the differences
between assets.
Chief executive Brad
Garlinghouse maintains that
XRP cryptocurrency should be
categorised differently, pointing
out differences between XRP
and classic securities, such as
stocks. “If you own XRP, you
don’t own rights to the profits
or any dividends. XRP has real
utility,” he says. “I think it’s a
matter of time until people
better understand the different
use-cases.”

phase of the geeks – too complicated “We found that whenever we men-
tion we’re a privacy coin, the invest-
ment community tend to shy away,” he
notes. “Since tipping the word to ‘con-
fidentiality’, and pitching that we are
creating an ecosystem of apps with the
ability to restore users’ confidentiality,
investors have been able to understand
what we’re doing and have become
really open to our proposition.”
In terms of funding, cryptocurren-
cies also need to secure the support
of organisations interested for the
long haul. “It’s actually too easy to raise
money for cryptocurrencies,” Mr Stone
says. “What we want is the right strate-
gic support.”
Rowan Stone
Director of business development
ZenCash recently scored a big win
with financial backing from the Digital
tion that will damage the industry.”
In the long term, cryptocurrencies
must ensure interoperability with bank-
ing systems. “At the moment the two do
not really talk, given that legacy banking
systems rely on masses of metadata,
whereas cryptocurrencies are essen-
tially an input and output hash,” says Mr
The first company to
make crypto and legacy
banking work well together
is likely to be the first to win
involvement of the FBI. Multiple
transactions were double
spent and scores of early users
needed to be reimbursed.
Soon after, following strategic
talks with Charles Hoskinson
of blockchain development
firm IOHK, ZenCash’s business
prospects brightened.
Introductions led to the hiring of
more high-calibre developers.
Listing on Bittrex led to
increased exposure which gave
ZenCash the budget required
to expand its team. Late-2017
saw ZenCash launch a secure
node network and its team
was expanded to more than
ZenCash listed on Binance,
the leading exchange of
its kind in the world. This
added exposure came at a
cost though with one of the
company’s exchange partners
being robbed through a 51 per
cent attack, which is an attack
on the blockchain. ZenCash,
however, has a fix in the works
that should eliminate these
risks for the whole industry.
ZenCash now has a user-base
numbering 70,000 people and
ambitions to become among the
most transparent, reliable and
well-structured cryptocurrency
operations in the world.
White papers bring some order to
the table, offering some transpar-
ency around the project on objectives,
funds needed, virtual tokens kept by
pioneers and the ICO campaign time-
line. Paul Anning, financial insti-
tutions group partner at law firm
Osborne Clarke in London, agrees:
“A lot of attention is paid at the point
when a white paper is published, but it
is equally important to pay attention
to the project going forward.”
Dennis
BDXCoin,
Uitz,
says
co-founder
trading
of
firms
need to comply with the rules for
exchanges and insist on extensive
record-keeping. Citing the recent
case of German-based ICO startup
Savedroid, when funds went “miss-
crypto investment.
Iqbal Gandham, chair of CryptoUK
and UK managing director at trad-
ing platform eToro, told a recent
Treasury Select Committee inquiry:
“Introducing a requirement for the
FCA to regulate the ‘on-off ’ ramps
between crypto and fiat currencies
ICOs attract early-
adopters and
operate creatively
like a crowdfunding
Ripple
framework whereby policymakers
could issue licences that include
consumer protections and the
gamut of regulatory concerns.
Ryan Zagone, director of regula-
tory relations at Ripple, says: “My
hope is they will opt for a licensing
solution. We have to ask why do we
want regulation? It is because of the
many new use-cases, and we need
to recognise there are many uses,
such as the consumer use-case, and
regulators need to preserve that.
Regulation is a prerequisite before
the professional players get into
this more aggressively.” Lawyer Mr
Anning concurs: “The important
question is what is the regulatory
objective?” Answer that and we may
Brad Garlinghouse

mass adoption
Ripple chief executive
ZenCash Currency Group, which has a similar ing” in an apparent public relations exercise be on the road to standardisation.
 10 CRYPTOCURRENCIES RACONTEUR.NET 11

Commercial feature INITIAL COIN OFFERINGS

What investors use to learn more about token/ICO projects

ZEN
ticker symbol
Blockchain media sites

White papers 63%

82%

$100m
Reddit 62%

Twitter 39%

market capitalisation
GitHub 29%

21m ZEN
Crypto hedge funds 10%

Let’s offer LinkedIn

Slack channels 1%
10%

a safer way
maximum supply

4m+ ZEN
ICO intentions

to invest
Have you taken part in an ICO and if so what have you done with your ICO tokens?

circulating supply

49% 39% 11% 10% 7% 4%

An urgent need remains to safeguard

Cryptos need core changes Stone. “It’s going to be a huge project, crypto, create an app or fork; it’s com- cryptocurrency launches and fundraising Am still Sold them
but the first company to make crypto and pletely open,” says Mr Stone.
legacy banking work well together is likely As the cryptocurrency world pushes from cash-grabbing scammers Have never
taken part
holding all
of my tokens
Sold them
into bitcoin
Sold them
into ether
into other
tokens
Sold them
into fiat

to work for everyone

to be the first to win mass adoption.” for simpler, accessible and trusted
He sees cryptocurrencies delivering on offerings, the potential for delivery on CoinDesk 2018

the original vision of making the world a this goal is now highly evident.
better place, by bringing banking solu-
tions to millions more people and intro- To find out more about ZenCash and stunt, he says: “That’s crazy. Client is well within the remit of HM
ducing personal financial stability to how it is simplifying cryptocurrencies DAVID COWAN funds should not be touched by Treasury. Based on our analysis, this most valuable coin measured

Cryptocurrencies have a powerful specialist investor base, but lack some of the most economically unstable
regions of the world. “The core thing to
mainstream consumer and business adoption. To succeed they need to be remember is that cryptocurrencies are
T
for all to use please visit zencash.com
or follow @zencashofficial
here is little doubt that ini-
tial coin offerings (ICOs)
companies. The use of funds should could be achieved relatively easily,
Case study
Ripple
by circulating supply market
be clearly stated; everything should without the need for primary legisla- capitalisation.
be made transparent in the white tion, and would have a huge impact, Ripple highlights the

easier to use, truly trusted and integrated with traditional banking systems a permissionless system; you don’t need
to be allowed by a government or a com-
promote innovation. Risk
and entrepreneurship have
paper. Cryptocurrencies are a two-
way communication between com-
both in reducing consumer risk and
improving industry standards.
Using the Ripple blockchain,
banks can send money
regulatory question of
classification. Cryptocurrency
pany to operate. Anyone can jump into always gone hand in hand, and ICOs pany and investor. “This is an approach which is internationally and use the prices have hitherto been
offer an exciting way for ventures “I am concerned when I hear regu- already working well in other coun- XRP token to square up highly correlated with bitcoin.

C
onsumers and companies are
taking an active interest in
cryptocurrencies, but there
is clearly a long way to go
before their eventual role in personal
and business finance is fully realised.
To some degree, a lack of broader
awareness of what cryptocurrencies
have to offer is holding the industry
back. But so too is a lack of joined up
thinking within some projects.
“Very few of the 2,000 or so crypto-
currencies operating have a truly busi-
ness-like operational structure and
a hierarchy that ensures they make
good strategic decisions,” says Rowan
Stone, director of business develop-
ment for cryptocurrency ZenCash. “All
these digital currencies are still in the
and clunky for many to use. People are
starting to realise that by fixing this we
can make traditional finance efficient.”
ZenCash is in the process of simplifying
usage of its products and core currency,
but it also has a broader vision. Work is
taking place to create an Apple App Store-
like platform that is simple to use and acts
as a whole ecosystem in itself. Companies
will be able to create their own apps with
any link to cryptocurrency and blockchain
technology, from real estate to informa-
tion storage and analysis.
For any cryptocurrency, when a truly
consumer-like interface like this is cre-
ated, mass adoption and institutional
investment could follow. But Mr Stone
says the industry also needs to tackle
how it is perceived by investors.
vision and owns a controlling stake in
a select group of the largest crypto-
currency firms. This opens up access
to institutional capital, while offering
other investors reassurance about the
quality of opportunity.
In addition, the industry needs regu-
latory acceptance. For now, the cryp-
tocurrency world remains relatively
unregulated and misunderstood, but
steps are being taken to make it less
risky and considerably more transpar-
ent. Mr Stone says he would welcome
any “sensible regulation that doesn’t
stifle growth”, adding: “Rather than
resisting regulation, which many
projects are doing, we are welcoming
open and honest conversation; with-
out it there will be broad-brush regula-
Experience creates strength
Despite having experienced
some significant setbacks and
a bumpy ride in ZenCash’s
short history, director
Rowan Stone remains
optimistic about the future
for cryptocurrencies. “We
become stronger and better
from our experiences,” he
says. “We’re now anti-fragile.”
Shortly after launch in May
2017, a ZenCash developer
attempted to bring down the
project following a coding
error. The situation resulted in
a criminal investigation and the
50 people. Not long after, the
cryptocurrency market crashed
and so did the value of the
company’s currency. Reserves
were substantial and well
organised but, nonetheless, it
came close to the wire.
Support from the Digital
Currency Group proved a timely
and important intervention.
Its backing gave the company
valuable credibility and access
to new investors, and led to its
entry into more online wallets,
exchanges and websites.
In the first half of 2018,
to raise money and for investors to
speculate. ICOs attract early-adop-
ters and operate creatively like a
crowdfunding exercise. However,
they are also unregulated, allowing
startups to bypass the rigorous and
well-regulated capital-raising pro-
cess in established markets.
This gives the unscrupulous a
platform for scamming and the non-
profit Anti-Phishing Working Group
estimates that about $1.2 billion in
cryptocurrencies has been stolen
since early-2017. Some say ICOs are
the wild west, susceptible to fraud
because not all exchanges actively
pursue scammers and wild fluctua-
tions in price swings inherent in the
market make it easy to mask artifi-
cial price manipulations.
lators say they regard cryptocurrency
and bitcoin as a threat. Self-regulation
will come and in many ways it is ideal
for innovation, but there are always
those who will not be compliant, so
we need to have a Europe-wide frame-
work to protect the basics and create
standardisation. However, we should
not kill innovation.”
CryptoUK was formed in February
by seven of the largest cryptocurrency
companies joining forces to promote
self-regulation within the UK crypto
industry. The association urges regu-
lators to focus on exchanges, brokers
and trading platforms rather than the
cryptocurrencies themselves, and
says HM Treasury should grant the
Financial Conduct Authority (FCA)
new permissions or licences to govern
tries, which are now taking the lead
over the UK, for example in Japan
and Gibraltar.” Guidelines from the
Centre for Rule-Making Strategies at
Tama University in Japan state that
ICO projects should be clear on dis-
tribution of funds, rules for tracking
the progress, the identity of buyers
and restrict insider trading.
Bans blocking exchanges and one-
size-fits-all approaches can stifle
innovation, and there is much sup-
port for focusing on a more sophis-
ticated use-approach. One use
is the enterprise use as a liquid-
ity tool for financial institutions;
another would address consumer
risks while enabling enterprise use.
For virtual currency uses, risks can
be addressed through a licensing
balances almost instantly.
What typically took days in the
past is now accomplished in
four seconds.
Based in San Francisco, Ripple
partners with over 100 banks,
with 75 more in the pipeline.
Ripple has made their protocol
open, encouraging developers
to build on top of their platform
and leverage their blockchain.
Accelerators focused
exclusively on products using
the Ripple protocol, such as
CrossCoin, have emerged to
further enhance this process.
Ripple is currently the third
However, Ripple believes this
could end soon as markets start
to acknowledge the differences
between assets.
Chief executive Brad
Garlinghouse maintains that
XRP cryptocurrency should be
categorised differently, pointing
out differences between XRP
and classic securities, such as
stocks. “If you own XRP, you
don’t own rights to the profits
or any dividends. XRP has real
utility,” he says. “I think it’s a
matter of time until people
better understand the different
use-cases.”

phase of the geeks – too complicated “We found that whenever we men-
tion we’re a privacy coin, the invest-
ment community tend to shy away,” he
notes. “Since tipping the word to ‘con-
fidentiality’, and pitching that we are
creating an ecosystem of apps with the
ability to restore users’ confidentiality,
investors have been able to understand
what we’re doing and have become
really open to our proposition.”
In terms of funding, cryptocurren-
cies also need to secure the support
of organisations interested for the
long haul. “It’s actually too easy to raise
money for cryptocurrencies,” Mr Stone
says. “What we want is the right strate-
gic support.”
Rowan Stone
Director of business development
ZenCash recently scored a big win
with financial backing from the Digital
tion that will damage the industry.”
In the long term, cryptocurrencies
must ensure interoperability with bank-
ing systems. “At the moment the two do
not really talk, given that legacy banking
systems rely on masses of metadata,
whereas cryptocurrencies are essen-
tially an input and output hash,” says Mr
The first company to
make crypto and legacy
banking work well together
is likely to be the first to win
involvement of the FBI. Multiple
transactions were double
spent and scores of early users
needed to be reimbursed.
Soon after, following strategic
talks with Charles Hoskinson
of blockchain development
firm IOHK, ZenCash’s business
prospects brightened.
Introductions led to the hiring of
more high-calibre developers.
Listing on Bittrex led to
increased exposure which gave
ZenCash the budget required
to expand its team. Late-2017
saw ZenCash launch a secure
node network and its team
was expanded to more than
ZenCash listed on Binance,
the leading exchange of
its kind in the world. This
added exposure came at a
cost though with one of the
company’s exchange partners
being robbed through a 51 per
cent attack, which is an attack
on the blockchain. ZenCash,
however, has a fix in the works
that should eliminate these
risks for the whole industry.
ZenCash now has a user-base
numbering 70,000 people and
ambitions to become among the
most transparent, reliable and
well-structured cryptocurrency
operations in the world.
White papers bring some order to
the table, offering some transpar-
ency around the project on objectives,
funds needed, virtual tokens kept by
pioneers and the ICO campaign time-
line. Paul Anning, financial insti-
tutions group partner at law firm
Osborne Clarke in London, agrees:
“A lot of attention is paid at the point
when a white paper is published, but it
is equally important to pay attention
to the project going forward.”
Dennis
BDXCoin,
Uitz,
says
co-founder
trading
of
firms
need to comply with the rules for
exchanges and insist on extensive
record-keeping. Citing the recent
case of German-based ICO startup
Savedroid, when funds went “miss-
crypto investment.
Iqbal Gandham, chair of CryptoUK
and UK managing director at trad-
ing platform eToro, told a recent
Treasury Select Committee inquiry:
“Introducing a requirement for the
FCA to regulate the ‘on-off ’ ramps
between crypto and fiat currencies
ICOs attract early-
adopters and
operate creatively
like a crowdfunding
Ripple
framework whereby policymakers
could issue licences that include
consumer protections and the
gamut of regulatory concerns.
Ryan Zagone, director of regula-
tory relations at Ripple, says: “My
hope is they will opt for a licensing
solution. We have to ask why do we
want regulation? It is because of the
many new use-cases, and we need
to recognise there are many uses,
such as the consumer use-case, and
regulators need to preserve that.
Regulation is a prerequisite before
the professional players get into
this more aggressively.” Lawyer Mr
Anning concurs: “The important
question is what is the regulatory
objective?” Answer that and we may
Brad Garlinghouse

mass adoption
Ripple chief executive
ZenCash Currency Group, which has a similar ing” in an apparent public relations exercise be on the road to standardisation.
12 CRYPTOCURRENCIES RACONTEUR.NET 13

Exploring the motives

Why consumers are investing in bitcoin Top concerns of crypto traders
and bullishness of Survey of those already invested in bitcoin as of November 2017 Percentage of crypto traders concerned with the
investors gives insight into following issues about crypto exchanges

SENTIMENT
the market sentiment for 8% 41%
cryptocurrencies, For transactions or I believe bitcoin is
purchases and less a world-changing
and where the industry of an investment technology
is heading

14%
Security 40 %
I believe the price
of bitcoin is too low
and will go higher

Crypto expectations
Survey of 1,800 individual cryptocurrency investors worldwide
15 % 22%
Shor
(n ex t
t te r
m
Total crypto
market cap will...
A friend, family member
or trustworthy source
convinced me to invest
A long-term store
of value, like gold
or silver
High
trading fees 37%
100% mon
th) substantially increase

slightly increase How long investors plan to hold on to their bitcoin

Survey of those already invested in bitcoin as of November 2017
remain the same

80% (n
M
ed
slightly decrease
12%
More than
16 %
Less than one year
Lack of
liquidity 36%
ex ten years
tt iu slump
hr
ee
m
te onth
10 %
m

r m s)

33%
Seven to Response
ten years
time from
60% support team

22% 40 %
Four to six years One to three years

Lendedu 2017 Lack of

crypto pairs 22%
40%

When crypto investors became involved

(n e
L o nthre e ye a rs

Year when investors were first active in cryptocurrency markets

21%
User friendliness
xt

80% and poor platform

g te r

interface
56 %
m

60%
20% of retail investors
and traders who own
)

cryptocurrencies intend
High
40% to buy more over the
next 12 months withdrawal
fees
18%
20%

0%
20% 40% 60% 80% 100%
0%
2010 2011 2012 2013 2014 2015 2016 2017
None
9%
Cryptocurrency Investor Sentiment Index Report - March, Huobi 2018 CoinDesk 2018 Encr ybit 2018
12 CRYPTOCURRENCIES RACONTEUR.NET 13

Exploring the motives

Why consumers are investing in bitcoin Top concerns of crypto traders
and bullishness of Survey of those already invested in bitcoin as of November 2017 Percentage of crypto traders concerned with the
investors gives insight into following issues about crypto exchanges

SENTIMENT
the market sentiment for 8% 41%
cryptocurrencies, For transactions or I believe bitcoin is
purchases and less a world-changing
and where the industry of an investment technology
is heading

14%
Security 40 %
I believe the price
of bitcoin is too low
and will go higher

Crypto expectations
Survey of 1,800 individual cryptocurrency investors worldwide
15 % 22%
Shor
(n ex t
t te r
m
Total crypto
market cap will...
A friend, family member
or trustworthy source
convinced me to invest
A long-term store
of value, like gold
or silver
High
trading fees 37%
100% mon
th) substantially increase

slightly increase How long investors plan to hold on to their bitcoin

Survey of those already invested in bitcoin as of November 2017
remain the same

80% (n
M
ed
slightly decrease
12%
More than
16 %
Less than one year
Lack of
liquidity 36%
ex ten years
tt iu slump
hr
ee
m
te onth
10 %
m

r m s)

33%
Seven to Response
ten years
time from
60% support team

22% 40 %
Four to six years One to three years

Lendedu 2017 Lack of

crypto pairs 22%
40%

When crypto investors became involved

(n e
L o nthre e ye a rs

Year when investors were first active in cryptocurrency markets

21%
User friendliness
xt

80% and poor platform

g te r

interface
56 %
m

60%
20% of retail investors
and traders who own
)

cryptocurrencies intend
High
40% to buy more over the
next 12 months withdrawal
fees
18%
20%

0%
20% 40% 60% 80% 100%
0%
2010 2011 2012 2013 2014 2015 2016 2017
None
9%
Cryptocurrency Investor Sentiment Index Report - March, Huobi 2018 CoinDesk 2018 Encr ybit 2018
 14 CRYPTOCURRENCIES
DISPELLING MYTHS
Time to put the record
straight about cryptos
The early mystique of cryptocurrencies
may have given rise to a number of
misunderstandings or myths which
can easily be dispelled
OLIVER PICKUP
Criminals use
cryptos because
they are anonymous
Cryptocurrencies are often viewed
with suspicion because of alleged
links to criminal activity. Many
believe, wrongly, that bitcoin and
other cryptos attract dark-web lurk-
ers because of their anonymity.
While users can be pseudo-anon-
ymous, every translation on the
underlying blockchain is tracea-
ble, by design. Kerim Derhalli, chief
executive of Invstr, says: “The single
most-outdated misconception is that
bitcoin and other ‘shady’ cryptos are
the preserve of drug dealers, child
abusers and weapons merchants.
The association of bitcoin with crim-
inality is a throwback to its earliest
days and has been deeply unhelp-
ful.” George Morris, partner at global
law firm Simmons & Simmons, adds:
“The majority of cryptocurrencies
are not entirely anonymous; in fact
they have a layer of transparency
that sets them apart from physical
commodities and cash. The physical
US dollar remains the number-one
instrument worldwide for nefarious
transactions and that is not going
to change soon. Cash remains king
as it provides a level of anonymisa-
tion that cannot be replicated by any
cryptocurrency.”
Billion Photos/Shutterstock
Crypto transactions take
too long to complete
In December, blockchain.com cal-
culated that one bitcoin transac-
tion takes on average 78 minutes.
This can be frustratingly slow
and, worse, unreliable – two of the
main reasons financial institu-
tions have not adopted the original
cryptocurrency. However, count-
less other cryptos have learnt from
bitcoin’s sluggishness and boast
near-instant transaction speeds.
Coins and tokens are
the same thing
Belief that cryptocurrency coins and
tokens are one and the same thing is
a common mistake, so don’t worry
if this comes as a shock. As Brian
Donegan, head of operations for fin-
tech and digital development at the
Isle of Man Department of Economic
Development, explains: “Coins such
as bitcoin have a tangible value that
Bitcoin is the best
Cryptos have no value long-term investment
Sceptics question the value of cryp- “Bitcoin’s investment performance
tocurrencies and ridicule investors depends on the entry and exit time,
for backing speculative, unregulated just like any other financial asset,”
assets. However, the fact is cryptos are says Julian Zegelman, cryptocur-
global, borderless currencies that fluc- rency lawyer and co-founder of TMT
tuate based on supply and demand. Blockchain Fund. But there is more to
Indeed, that it is cashless is why numer- it than that. It is estimated there are
ous supporters believe it is the future now around 1,600 cryptocurrencies
of finance. Siam Kidd, founder of and, although they can all be traced
TheRealisticTrader.com, says: “Over 90 back to bitcoin, many are far supe-
per cent of the money people hold dear, rior in technological terms. Other
like the dollar, euro or pound, is already crypto projects have improved upon
in digital format. There is a very small bitcoin’s sluggish transaction speed
supply of actual hard money these and solved its scalability concerns.
days. The general trend around the Consequently, if (or when) cryp-
world is a move towards cashless socie- tos are widely accepted by financial
ties. Also cryptos like bitcoin can’t just institutions, bitcoin is likely to be left
be inflated away via quantitative eas- behind. Investors are aware of this.
ing like fiat currencies, and as bitcoin is Consider how in 2017 bitcoin’s annual
a scarce and deflationary currency, it’s return was 1,289 per cent – impres-
easily argued that it is a far better store sive, but way below the 19,830 per cent
of wealth.” the other top five cryptos gained.
XRP, the token of Ripple, has a
processing speed of just four sec-
onds, according to the blockchain.
com research. Further, Ripple
is able to complete 1,500 trans-
actions a second. It is still some
way of Visa’s 24,000 transactions
per second, but the technology is
being improved upon all the time.
For instance, at BlockShow 2018
Europe, hosted in Berlin in late-
May, David Schwartz, the chief
cryptographer at Ripple hailed
the recent introduction of the
Lightning Network, calling it a
game-changer.
Things/Shutterstock
may go up or down and can be wildly
volatile in the markets – just look at
the period from June to December
last year when one bitcoin rose
from around $2,500 to just under
$20,000. Tokens on the other hand,
if designed as a utility, as opposed to
a security, facilitate access to online
goods and services.”
spyarm/Shutterstock
OPINION COLUMN
‘There is no reason
to let short-term
concerns cloud our
view of the future’
C
ryptocurrencies are crit-
icised for their volatility,
exposure to hacking and
manipulation, and poten-
tial facilitation of money launder-
ing. But it is quite common for inno-
vations to encounter hesitant starts,
and yet bring enormous economic
and social benefits and change.
Thirty years ago, or even more
recently amid the dot-com collapse,
it would be difficult to imagine that
there would be a small number of
dominant technology companies,
notably Google, Apple, Facebook and
Amazon (GAFA), bringing such social
and economic change. Furthermore,
the challenges they are bringing along
with these benefits were not always
those that would have been imagined.
All this is probably relevant for
crypto assets. Some of the concerns
that people worry about – volatility,
exposure to manipulation, lack of
acceptability – are unlikely to be long-
term issues. They stem from illiquid-
ity. Once there is enough liquidity,
these issues will disappear and there
are good reasons why liquidity for the
“winning” cryptocurrencies is likely to
improve in the near or medium term.
One reason sits with central banks,
where two distinct shifts may have a
big impact. One is that leading mer-
chant and international banks are
starting to offer services involving
crypto assets, for example offering
exchange-traded futures on crypto
assets when requested by custom-
ers, which in turn is putting pressure
on central banks to develop pruden-
tial rules for the treatment of crypto
assets on bank balance sheets.
A critical side effect of this activ-
ity is that the introduction of formal
regulatory approved valuation and
risk-measurement techniques, aimed
at ensuring the resilience of the bank-
ing sector, will bring cryptocurrencies
into mainstream banking and legit-
imise them. The other is the role of
digital currencies in central banking
payment systems. Central banks are
all actively looking at introducing digi-
tal currencies and it is not if, but only a
question of when this will happen.
The entry of central banks into the
digital currency arena will bring the
general populace into using digi-
tal currencies on a daily basis, from
which the jump to using cryptocur-
rencies becomes a much smaller step.
The arrival of well-functioning
cryptocurrencies could, for exam-
ple, be a boon for users of retail bank-
ing services enabling them to use
low-cost, fully verifiable transaction
mechanisms to replace the existing
expensive payment services offered
by banks. But this is essentially
replacing existing systems with
cheaper alternatives and the poten-
tial for innovative services is proba-
bly where the long-term benefits lie.
The benefits for insurance mar-
kets are often cited as an area that
will benefit greatly since cryptocur-
rencies and the underlying block-
chain should enable the exact price
of insured items to be verified, rapid
and precise public verification of
events triggering insurance pay-
ments, and provide the relevant
payment, all on one platform.
However, the ability for crypto-
currencies to include insurance-like
contracts triggered by specific
events, so-called smart contracts,
appears to be even more exciting.
It could enable small firms to bor-
row more easily and at lower rates
because they will be able to publicly
offload certain risks that depend on
well-identified outcomes, such as
currency exchange-rate triggers and
prices of commodities futures. Such
smart contracts could also be used
to affect bond ratings and essen-
tially could be useful in all sorts of
investment opportunities.
Given the need for liquidity, we
will probably end up with a small
number of very large cryptocurren-
cies, but many smaller niche ones
that are used extensively by particu-
lar industries and social networks,
where the concentration on a spe-
cific industry or network provides a
degree of protection against lower
liquidity, all sitting alongside cen-
tral banks digital currencies.
At the end of the day, as with the
GAFA example, it is difficult to be
sure where all this will land, but there
is no reason to let short-term con-
cerns cloud our view of the future.
Ania Zalewska
Professor of finance
Director of the Centre for Governance,
Regulation and Industrial Strategy
University of Bath
Blockchain
democratises quality
investment for everyone
Cryptocurrency ledger technology is opening up formerly
advanced investment products to regular retail customers. By
dividing investment amounts into small portions and enabling quick
access, it is transforming ways of growing wealth
I
nvesting in real estate portfo-
lios, private equity firms and other
non-public corporate enterprises
has typically been the exclusive
domain of asset and wealth manag-
ers whose clients have £100,000 or
more to put in. But the security of
blockchain technology and the reli-
ability of distributed ledgers mean
investments can easily be broken into
smaller chunks, offering opportuni-
ties to everyone. Anyone with as little
as £200 can now invest in assets that
were beyond reach.
This technological shift has meant
thousands of companies have created
virtual tokens to build their own invest-
ment vehicles and quickly raise capital.
Many are offering cryptocurrency coins
through an initial coin offering (ICO),
rather like a form of corporate debt, and
beginning to raise capital from a wide
variety of investors on a global basis.
However, investors in these ICOs face
myriad options. Many of the new inves-
tors may not be familiar with corporate
Watch your wallet
flood with new coins
Trade your coins
Long-term
investment
Commercial feature
due diligence processes or know how
to check and understand what they
are investing in.
A new breed of companies is using
the benefits of cryptocurrency to
change this. One cryptocurrency is
BDXcoin, born out of the skillsets of for-
eign exchange and futures trading firm
BDSwiss. It has created a “master coin”
or purchasable token that can be used
to buy services and trade within the BDX
ecosystem, comprised of an ICO plat-
form and crypto exchange, for zero fees.
Every time an ICO is launched on
the platform or a token is listed on
the crypto exchange, BDXcoin holders
receive additional tokens from those
companies as a reward. To guarantee
the quality of investment, BDXcoin
employs its own assessment and has
rejected nearly 92 per cent of ICO
applications. In its review, it evaluates
five factors: the founders and their
prior accomplishments, if there is a
credible need for blockchain, the way
the token is designed, the business
plan and market fit.
“We’ve been able to “tokenise”
investment, meaning anyone can buy
our tokens and receive the rewards of
our ecosystem,” explains Dennis Uitz,
co-founder of the company. BDXcoin
currently has coin issues from 11 differ-
ent firms in its portfolio and there is an
ongoing queue being further assessed
before launching.
These white-labelled ICOs include one
from a real estate developer with €200
million of assets in Germany. Another is
from a travel and leisure gift card com-
pany, the largest in the Austrian market,
and a third issue involves an established
Tunisian company developing the first
African Formula 1 racetrack.
RACONTEUR.NET 15
Perhaps the most cutting-edge issue
is in the private equity space, which is
typically off limits for all but institu-
tional investors. The company involved
is a German private equity house typ-
ically returning more than 18 per cent
per annum to its investors, looking to
significantly broaden its capital base by
tokenising products.
Mr Uitz says blockchain technology
and cryptocurrency models open up
investment opportunities, but adds:
“Investors can see from the huge range
of coin issues out there that our eval-
uations are key to a good investment.
“With so many options, investors
need a quality due diligence process,
and institutional quality investment
that will stand up to regulatory scru-
tiny and create proper returns. That’s
why we’re applying investment-bank-
ing level due diligence across the ICO
opportunities we review.”
More than 3,000 investors already
own BDXcoin tokens and millions
more potential clients are beginning
to examine cryptocurrency options.
There is clearly huge scope for the
right businesses to list coins and
raise capital. Protected by proper
due diligence, investors have an
enormous opportunity to invest any
amount of money in strong teams
and organisations.
To find out how to take advantage of
blockchain technology for accessible,
high-quality investments please visit
bdxcoin.com
 14 CRYPTOCURRENCIES
DISPELLING MYTHS
Time to put the record
straight about cryptos
The early mystique of cryptocurrencies
may have given rise to a number of
misunderstandings or myths which
can easily be dispelled
OLIVER PICKUP
Criminals use
cryptos because
they are anonymous
Cryptocurrencies are often viewed
with suspicion because of alleged
links to criminal activity. Many
believe, wrongly, that bitcoin and
other cryptos attract dark-web lurk-
ers because of their anonymity.
While users can be pseudo-anon-
ymous, every translation on the
underlying blockchain is tracea-
ble, by design. Kerim Derhalli, chief
executive of Invstr, says: “The single
most-outdated misconception is that
bitcoin and other ‘shady’ cryptos are
the preserve of drug dealers, child
abusers and weapons merchants.
The association of bitcoin with crim-
inality is a throwback to its earliest
days and has been deeply unhelp-
ful.” George Morris, partner at global
law firm Simmons & Simmons, adds:
“The majority of cryptocurrencies
are not entirely anonymous; in fact
they have a layer of transparency
that sets them apart from physical
commodities and cash. The physical
US dollar remains the number-one
instrument worldwide for nefarious
transactions and that is not going
to change soon. Cash remains king
as it provides a level of anonymisa-
tion that cannot be replicated by any
cryptocurrency.”
Billion Photos/Shutterstock
Crypto transactions take
too long to complete
In December, blockchain.com cal-
culated that one bitcoin transac-
tion takes on average 78 minutes.
This can be frustratingly slow
and, worse, unreliable – two of the
main reasons financial institu-
tions have not adopted the original
cryptocurrency. However, count-
less other cryptos have learnt from
bitcoin’s sluggishness and boast
near-instant transaction speeds.
Coins and tokens are
the same thing
Belief that cryptocurrency coins and
tokens are one and the same thing is
a common mistake, so don’t worry
if this comes as a shock. As Brian
Donegan, head of operations for fin-
tech and digital development at the
Isle of Man Department of Economic
Development, explains: “Coins such
as bitcoin have a tangible value that
Bitcoin is the best
Cryptos have no value long-term investment
Sceptics question the value of cryp- “Bitcoin’s investment performance
tocurrencies and ridicule investors depends on the entry and exit time,
for backing speculative, unregulated just like any other financial asset,”
assets. However, the fact is cryptos are says Julian Zegelman, cryptocur-
global, borderless currencies that fluc- rency lawyer and co-founder of TMT
tuate based on supply and demand. Blockchain Fund. But there is more to
Indeed, that it is cashless is why numer- it than that. It is estimated there are
ous supporters believe it is the future now around 1,600 cryptocurrencies
of finance. Siam Kidd, founder of and, although they can all be traced
TheRealisticTrader.com, says: “Over 90 back to bitcoin, many are far supe-
per cent of the money people hold dear, rior in technological terms. Other
like the dollar, euro or pound, is already crypto projects have improved upon
in digital format. There is a very small bitcoin’s sluggish transaction speed
supply of actual hard money these and solved its scalability concerns.
days. The general trend around the Consequently, if (or when) cryp-
world is a move towards cashless socie- tos are widely accepted by financial
ties. Also cryptos like bitcoin can’t just institutions, bitcoin is likely to be left
be inflated away via quantitative eas- behind. Investors are aware of this.
ing like fiat currencies, and as bitcoin is Consider how in 2017 bitcoin’s annual
a scarce and deflationary currency, it’s return was 1,289 per cent – impres-
easily argued that it is a far better store sive, but way below the 19,830 per cent
of wealth.” the other top five cryptos gained.
XRP, the token of Ripple, has a
processing speed of just four sec-
onds, according to the blockchain.
com research. Further, Ripple
is able to complete 1,500 trans-
actions a second. It is still some
way of Visa’s 24,000 transactions
per second, but the technology is
being improved upon all the time.
For instance, at BlockShow 2018
Europe, hosted in Berlin in late-
May, David Schwartz, the chief
cryptographer at Ripple hailed
the recent introduction of the
Lightning Network, calling it a
game-changer.
Things/Shutterstock
may go up or down and can be wildly
volatile in the markets – just look at
the period from June to December
last year when one bitcoin rose
from around $2,500 to just under
$20,000. Tokens on the other hand,
if designed as a utility, as opposed to
a security, facilitate access to online
goods and services.”
spyarm/Shutterstock
OPINION COLUMN
‘There is no reason
to let short-term
concerns cloud our
view of the future’
C
ryptocurrencies are crit-
icised for their volatility,
exposure to hacking and
manipulation, and poten-
tial facilitation of money launder-
ing. But it is quite common for inno-
vations to encounter hesitant starts,
and yet bring enormous economic
and social benefits and change.
Thirty years ago, or even more
recently amid the dot-com collapse,
it would be difficult to imagine that
there would be a small number of
dominant technology companies,
notably Google, Apple, Facebook and
Amazon (GAFA), bringing such social
and economic change. Furthermore,
the challenges they are bringing along
with these benefits were not always
those that would have been imagined.
All this is probably relevant for
crypto assets. Some of the concerns
that people worry about – volatility,
exposure to manipulation, lack of
acceptability – are unlikely to be long-
term issues. They stem from illiquid-
ity. Once there is enough liquidity,
these issues will disappear and there
are good reasons why liquidity for the
“winning” cryptocurrencies is likely to
improve in the near or medium term.
One reason sits with central banks,
where two distinct shifts may have a
big impact. One is that leading mer-
chant and international banks are
starting to offer services involving
crypto assets, for example offering
exchange-traded futures on crypto
assets when requested by custom-
ers, which in turn is putting pressure
on central banks to develop pruden-
tial rules for the treatment of crypto
assets on bank balance sheets.
A critical side effect of this activ-
ity is that the introduction of formal
regulatory approved valuation and
risk-measurement techniques, aimed
at ensuring the resilience of the bank-
ing sector, will bring cryptocurrencies
into mainstream banking and legit-
imise them. The other is the role of
digital currencies in central banking
payment systems. Central banks are
all actively looking at introducing digi-
tal currencies and it is not if, but only a
question of when this will happen.
The entry of central banks into the
digital currency arena will bring the
general populace into using digi-
tal currencies on a daily basis, from
which the jump to using cryptocur-
rencies becomes a much smaller step.
The arrival of well-functioning
cryptocurrencies could, for exam-
ple, be a boon for users of retail bank-
ing services enabling them to use
low-cost, fully verifiable transaction
mechanisms to replace the existing
expensive payment services offered
by banks. But this is essentially
replacing existing systems with
cheaper alternatives and the poten-
tial for innovative services is proba-
bly where the long-term benefits lie.
The benefits for insurance mar-
kets are often cited as an area that
will benefit greatly since cryptocur-
rencies and the underlying block-
chain should enable the exact price
of insured items to be verified, rapid
and precise public verification of
events triggering insurance pay-
ments, and provide the relevant
payment, all on one platform.
However, the ability for crypto-
currencies to include insurance-like
contracts triggered by specific
events, so-called smart contracts,
appears to be even more exciting.
It could enable small firms to bor-
row more easily and at lower rates
because they will be able to publicly
offload certain risks that depend on
well-identified outcomes, such as
currency exchange-rate triggers and
prices of commodities futures. Such
smart contracts could also be used
to affect bond ratings and essen-
tially could be useful in all sorts of
investment opportunities.
Given the need for liquidity, we
will probably end up with a small
number of very large cryptocurren-
cies, but many smaller niche ones
that are used extensively by particu-
lar industries and social networks,
where the concentration on a spe-
cific industry or network provides a
degree of protection against lower
liquidity, all sitting alongside cen-
tral banks digital currencies.
At the end of the day, as with the
GAFA example, it is difficult to be
sure where all this will land, but there
is no reason to let short-term con-
cerns cloud our view of the future.
Ania Zalewska
Professor of finance
Director of the Centre for Governance,
Regulation and Industrial Strategy
University of Bath
Blockchain
democratises quality
investment for everyone
Cryptocurrency ledger technology is opening up formerly
advanced investment products to regular retail customers. By
dividing investment amounts into small portions and enabling quick
access, it is transforming ways of growing wealth
I
nvesting in real estate portfo-
lios, private equity firms and other
non-public corporate enterprises
has typically been the exclusive
domain of asset and wealth manag-
ers whose clients have £100,000 or
more to put in. But the security of
blockchain technology and the reli-
ability of distributed ledgers mean
investments can easily be broken into
smaller chunks, offering opportuni-
ties to everyone. Anyone with as little
as £200 can now invest in assets that
were beyond reach.
This technological shift has meant
thousands of companies have created
virtual tokens to build their own invest-
ment vehicles and quickly raise capital.
Many are offering cryptocurrency coins
through an initial coin offering (ICO),
rather like a form of corporate debt, and
beginning to raise capital from a wide
variety of investors on a global basis.
However, investors in these ICOs face
myriad options. Many of the new inves-
tors may not be familiar with corporate
Watch your wallet
flood with new coins
Trade your coins
Long-term
investment
Commercial feature
due diligence processes or know how
to check and understand what they
are investing in.
A new breed of companies is using
the benefits of cryptocurrency to
change this. One cryptocurrency is
BDXcoin, born out of the skillsets of for-
eign exchange and futures trading firm
BDSwiss. It has created a “master coin”
or purchasable token that can be used
to buy services and trade within the BDX
ecosystem, comprised of an ICO plat-
form and crypto exchange, for zero fees.
Every time an ICO is launched on
the platform or a token is listed on
the crypto exchange, BDXcoin holders
receive additional tokens from those
companies as a reward. To guarantee
the quality of investment, BDXcoin
employs its own assessment and has
rejected nearly 92 per cent of ICO
applications. In its review, it evaluates
five factors: the founders and their
prior accomplishments, if there is a
credible need for blockchain, the way
the token is designed, the business
plan and market fit.
“We’ve been able to “tokenise”
investment, meaning anyone can buy
our tokens and receive the rewards of
our ecosystem,” explains Dennis Uitz,
co-founder of the company. BDXcoin
currently has coin issues from 11 differ-
ent firms in its portfolio and there is an
ongoing queue being further assessed
before launching.
These white-labelled ICOs include one
from a real estate developer with €200
million of assets in Germany. Another is
from a travel and leisure gift card com-
pany, the largest in the Austrian market,
and a third issue involves an established
Tunisian company developing the first
African Formula 1 racetrack.
RACONTEUR.NET 15
Perhaps the most cutting-edge issue
is in the private equity space, which is
typically off limits for all but institu-
tional investors. The company involved
is a German private equity house typ-
ically returning more than 18 per cent
per annum to its investors, looking to
significantly broaden its capital base by
tokenising products.
Mr Uitz says blockchain technology
and cryptocurrency models open up
investment opportunities, but adds:
“Investors can see from the huge range
of coin issues out there that our eval-
uations are key to a good investment.
“With so many options, investors
need a quality due diligence process,
and institutional quality investment
that will stand up to regulatory scru-
tiny and create proper returns. That’s
why we’re applying investment-bank-
ing level due diligence across the ICO
opportunities we review.”
More than 3,000 investors already
own BDXcoin tokens and millions
more potential clients are beginning
to examine cryptocurrency options.
There is clearly huge scope for the
right businesses to list coins and
raise capital. Protected by proper
due diligence, investors have an
enormous opportunity to invest any
amount of money in strong teams
and organisations.
To find out how to take advantage of
blockchain technology for accessible,
high-quality investments please visit
bdxcoin.com
 16 CRYPTOCURRENCIES
WOMEN
Women at the top driving crypto evolution
Although the
fintech sector is
dominated by men,
women are staking
a claim in emerging
cryptocurrencies
FIONA BOND
T
he tectonic plates of the
cryptocurrency landscape
are shifting. In the first ten
months of 2017, four out of
the 30 largest initial coin offerings
(ICOs) boasted female co-founders
and, according to Bloomberg, two of
the female-led ICOs were among the
biggest to date. It’s a trend that holds
promise for the industry.
In little under a decade, block-
chain and cryptocurrency have
grown sensationally, offering an
undeniably exciting antithesis to
the rigid confines of the traditional
financial ecosystem.
As Sandra Ro, chief executive of
the Global Blockchain Business
Council, explains when asked what
first attracted her to this space: “It’s
the transformative potential of this
technology and the decentralised
community; the most eclectic col-
lection of curious, collaborative,
open and globally-minded people
working towards innovation and
most towards good solutions for
humanity.”
Teana Baker-Taylor, chief market-
ing officer at Coinfloor, echoes Ms
Ro’s views. “Coming from a career in
traditional finance, I’d been through
several periods where consumer
02
confidence in the financial system
had been compromised. I was fas-
cinated by the decentralised nature
of crypto and how trust in the sys-
tem is generated by consensus,” she
says.
“I see crypto assets as additive
to our investment options and our
ability to transact with each other.
My long-term hope is that the token
economy grows responsibly to ena-
ble everyone greater access to finan-
cial services and raising capital for
new businesses.”
01
While bitcoin, arguably cryptocur-
rency’s biggest export, has seen its
star rise and fall in recent months,
it is clear interest in the industry
remains buoyant. Yet, ironically
for a technology that seeks to break
down barriers with its innovative
and unique concept, the crypto-
currency industry has yet to make
the same strides when it comes to
diversity.
The latest Google analysis sug-
gested that an overwhelming 95 per
cent of bitcoin searches were made
by men. Meanwhile, overall female
participation in cryptocurrency is
commonly pegged at between 4 and
6 per cent.
Though such figures cannot be
truly ascertained due to the anony-
mous nature of cryptocurrency, it is
clear the tech industry is still very
much a man’s world. A recent Forbes
study of the top 20 wealthiest people
in the crypto industry showed they
were all men.
Meltem Demirors, chief strategy
officer at CoinShares, says: “If you
look closely at the cryptocurrency
space, you will see a number of
women. The challenge we face, how-
ever, is that they are not the found-
ers of businesses and thus not given
the same recognition as their male
counterparts. That is the issue we
must overcome.”
Unsurprisingly, the dynamics
have spawned a flurry of female
networks and groups. From Blythe
Masters, who quit her job at J.P.
Morgan Chase & Co to run Digital
Asset Holdings, to Elizabeth Stark,
01 chief executive of Lightning Labs,
Sandra Ro,
there are a number of formidable
chief executive,
Global Blockchain women leading the charge.
Business Council Ms Demirors says: “We are for-
tunate to have a strong network of
02
ambitious, like-minded women who
Teana Baker-Taylor,
chief marketing collaborate and work together, iden-
officer, Coinfloor tifying ways to create a more diverse
community.”
03
Claire Wells, legal and business
Claire Wells,
director of legal affairs director at blockchain com-
and business pany Circle, adds: “Fin and tech are
affairs, Circle not known for their diversity, but I
think the industry is getting much
04
Meltem Demirors, better. Diversity is a topic I feel very
chief strategy passionate about and have done a
officer, Coinshares lot of work to promote, through con-
ferences, like Women of the Square
Mile, and as one of the first signato-
ries on the HM Treasury’s Women in
Fintech Charter.”
And diversity is the key word here.
For these women, it is important all
groups are given the opportunity to
participate in this huge wealth-crea-
tion event, not simply females.
Indeed, many women argue that
simply drawing attention to the gen-
der gap brings little benefit. They
We are fortunate to have a strong
network of ambitious, like-minded
women who collaborate and work
together, identifying ways to create
a more diverse community
RACONTEUR.NET 17
continue to garner interest, it is clear
that we are only at the beginning of
council member of newly formed
industry body Global Digital
what looks set to be a compelling
story, regardless of gender. And with
Finance, Ms Baker-Taylor says the
next chapter will be defined regu-
that comes much excitement. latory frameworks. The body is cur-
Ms Wells says she is particularly rently drafting a code of conduct
passionate about The Circle USDC; and token taxonomy to help the
her firm recently announced that
it is working to launch the USDC
industry engage with policymakers.
She says: “We are at a regulatory
stablecoin.
She explains: “For me, it’s the
crossroads; policymakers are in the
process of evaluating new technol-
first step in the road to tokenisa- ogy, new methods of raising capital
tion and a significant game-changer and evolving ways to transfer value.
in the industry. With USDC comes I’m passionate about this project
a price-stable means of exchange because I believe it’s imperative we,
and store of value badly needed for the industry, work together with pol-
financial interoperability to func- icymakers to help define balanced
tion reliably and consistently in the regulatory frameworks to promote
financial ecosystem. good practices while enabling the
“What really excites me is with crypto-asset industry to grow.”
the advent of cryptographic assets But while there is undeniable
and blockchain-based technology interest in tackling interoperability
comes the capability to disrupt tra- and scaling issues, the social impact
ditional systems and democratise must not be underestimated.
the financial industry by giving the Ms Ro, who believes cryptocur-
power back to the individual to cre- rency should be harnessed for a
ate, store and share value.” “fairer, less corrupt world”, says we
According to Ms Demirors, the are in the throes of a unique oppor-
industry hasn’t fared well on pro- tunity to reorganise the way value is
moting the usability of assets and, distributed around the world.
rather than become too tech-fo- She concludes: “We need entre-
cused, should be looking at ways to preneurs who will push boundaries
encourage people to use tokens for and develop emerging technologies.
03 uses beyond financial speculation. There is as much a human, culture
But with this comes the need for shift element to what is going on as
greater regulation. As an advisory well as the technical evolution.”
have a strong desire to be recognised
for their accomplishments not their
gender, and believe true change will
stem from inspiring others through
their passion, energy and success
stories.
Ms Baker-Taylor says: “I don’t think
we need to highlight the industry to
women per se, but more coverage of
the innovation and the transforma-
tional projects underway, especially
those championed by female lead-
ers, would help to attract top talent.
This industry is very passionate and
it is evolving every day as new pro-
jects are announced and partner-
ships formed.
“Crypto is burgeoning and it is
open to everyone. Now is an incred-
ible time to get involved because it’s
growing and it’s hungry for talented
people. Personally, it was an incred-
ible opportunity for me to transition
from traditional finance into what I
think could be an evolutionary shift
for financial services.”
If the thinking behind blockchain
was to revolutionise the way peo-
ple interact and transact, being led
by a largely homogenous network
of people will only result in biased
products.
Ms Ro points out: “As CEO of the
Global Blockchain Business Council
and co-founder of several start-
ups, I want to hire talented people,
including awareness of diversity
across gender and backgrounds,
discourage ‘group think’ mental-
ity and lead by action, integrity and
accountability.”
04
As cryptocurrency and blockchain
 16 CRYPTOCURRENCIES
WOMEN
Women at the top driving crypto evolution
Although the
fintech sector is
dominated by men,
women are staking
a claim in emerging
cryptocurrencies
FIONA BOND
T
he tectonic plates of the
cryptocurrency landscape
are shifting. In the first ten
months of 2017, four out of
the 30 largest initial coin offerings
(ICOs) boasted female co-founders
and, according to Bloomberg, two of
the female-led ICOs were among the
biggest to date. It’s a trend that holds
promise for the industry.
In little under a decade, block-
chain and cryptocurrency have
grown sensationally, offering an
undeniably exciting antithesis to
the rigid confines of the traditional
financial ecosystem.
As Sandra Ro, chief executive of
the Global Blockchain Business
Council, explains when asked what
first attracted her to this space: “It’s
the transformative potential of this
technology and the decentralised
community; the most eclectic col-
lection of curious, collaborative,
open and globally-minded people
working towards innovation and
most towards good solutions for
humanity.”
Teana Baker-Taylor, chief market-
ing officer at Coinfloor, echoes Ms
Ro’s views. “Coming from a career in
traditional finance, I’d been through
several periods where consumer
02
confidence in the financial system
had been compromised. I was fas-
cinated by the decentralised nature
of crypto and how trust in the sys-
tem is generated by consensus,” she
says.
“I see crypto assets as additive
to our investment options and our
ability to transact with each other.
My long-term hope is that the token
economy grows responsibly to ena-
ble everyone greater access to finan-
cial services and raising capital for
new businesses.”
01
While bitcoin, arguably cryptocur-
rency’s biggest export, has seen its
star rise and fall in recent months,
it is clear interest in the industry
remains buoyant. Yet, ironically
for a technology that seeks to break
down barriers with its innovative
and unique concept, the crypto-
currency industry has yet to make
the same strides when it comes to
diversity.
The latest Google analysis sug-
gested that an overwhelming 95 per
cent of bitcoin searches were made
by men. Meanwhile, overall female
participation in cryptocurrency is
commonly pegged at between 4 and
6 per cent.
Though such figures cannot be
truly ascertained due to the anony-
mous nature of cryptocurrency, it is
clear the tech industry is still very
much a man’s world. A recent Forbes
study of the top 20 wealthiest people
in the crypto industry showed they
were all men.
Meltem Demirors, chief strategy
officer at CoinShares, says: “If you
look closely at the cryptocurrency
space, you will see a number of
women. The challenge we face, how-
ever, is that they are not the found-
ers of businesses and thus not given
the same recognition as their male
counterparts. That is the issue we
must overcome.”
Unsurprisingly, the dynamics
have spawned a flurry of female
networks and groups. From Blythe
Masters, who quit her job at J.P.
Morgan Chase & Co to run Digital
Asset Holdings, to Elizabeth Stark,
01 chief executive of Lightning Labs,
Sandra Ro,
there are a number of formidable
chief executive,
Global Blockchain women leading the charge.
Business Council Ms Demirors says: “We are for-
tunate to have a strong network of
02
ambitious, like-minded women who
Teana Baker-Taylor,
chief marketing collaborate and work together, iden-
officer, Coinfloor tifying ways to create a more diverse
community.”
03
Claire Wells, legal and business
Claire Wells,
director of legal affairs director at blockchain com-
and business pany Circle, adds: “Fin and tech are
affairs, Circle not known for their diversity, but I
think the industry is getting much
04
Meltem Demirors, better. Diversity is a topic I feel very
chief strategy passionate about and have done a
officer, Coinshares lot of work to promote, through con-
ferences, like Women of the Square
Mile, and as one of the first signato-
ries on the HM Treasury’s Women in
Fintech Charter.”
And diversity is the key word here.
For these women, it is important all
groups are given the opportunity to
participate in this huge wealth-crea-
tion event, not simply females.
Indeed, many women argue that
simply drawing attention to the gen-
der gap brings little benefit. They
We are fortunate to have a strong
network of ambitious, like-minded
women who collaborate and work
together, identifying ways to create
a more diverse community
RACONTEUR.NET 17
continue to garner interest, it is clear
that we are only at the beginning of
council member of newly formed
industry body Global Digital
what looks set to be a compelling
story, regardless of gender. And with
Finance, Ms Baker-Taylor says the
next chapter will be defined regu-
that comes much excitement. latory frameworks. The body is cur-
Ms Wells says she is particularly rently drafting a code of conduct
passionate about The Circle USDC; and token taxonomy to help the
her firm recently announced that
it is working to launch the USDC
industry engage with policymakers.
She says: “We are at a regulatory
stablecoin.
She explains: “For me, it’s the
crossroads; policymakers are in the
process of evaluating new technol-
first step in the road to tokenisa- ogy, new methods of raising capital
tion and a significant game-changer and evolving ways to transfer value.
in the industry. With USDC comes I’m passionate about this project
a price-stable means of exchange because I believe it’s imperative we,
and store of value badly needed for the industry, work together with pol-
financial interoperability to func- icymakers to help define balanced
tion reliably and consistently in the regulatory frameworks to promote
financial ecosystem. good practices while enabling the
“What really excites me is with crypto-asset industry to grow.”
the advent of cryptographic assets But while there is undeniable
and blockchain-based technology interest in tackling interoperability
comes the capability to disrupt tra- and scaling issues, the social impact
ditional systems and democratise must not be underestimated.
the financial industry by giving the Ms Ro, who believes cryptocur-
power back to the individual to cre- rency should be harnessed for a
ate, store and share value.” “fairer, less corrupt world”, says we
According to Ms Demirors, the are in the throes of a unique oppor-
industry hasn’t fared well on pro- tunity to reorganise the way value is
moting the usability of assets and, distributed around the world.
rather than become too tech-fo- She concludes: “We need entre-
cused, should be looking at ways to preneurs who will push boundaries
encourage people to use tokens for and develop emerging technologies.
03 uses beyond financial speculation. There is as much a human, culture
But with this comes the need for shift element to what is going on as
greater regulation. As an advisory well as the technical evolution.”
have a strong desire to be recognised
for their accomplishments not their
gender, and believe true change will
stem from inspiring others through
their passion, energy and success
stories.
Ms Baker-Taylor says: “I don’t think
we need to highlight the industry to
women per se, but more coverage of
the innovation and the transforma-
tional projects underway, especially
those championed by female lead-
ers, would help to attract top talent.
This industry is very passionate and
it is evolving every day as new pro-
jects are announced and partner-
ships formed.
“Crypto is burgeoning and it is
open to everyone. Now is an incred-
ible time to get involved because it’s
growing and it’s hungry for talented
people. Personally, it was an incred-
ible opportunity for me to transition
from traditional finance into what I
think could be an evolutionary shift
for financial services.”
If the thinking behind blockchain
was to revolutionise the way peo-
ple interact and transact, being led
by a largely homogenous network
of people will only result in biased
products.
Ms Ro points out: “As CEO of the
Global Blockchain Business Council
and co-founder of several start-
ups, I want to hire talented people,
including awareness of diversity
across gender and backgrounds,
discourage ‘group think’ mental-
ity and lead by action, integrity and
accountability.”
04
As cryptocurrency and blockchain
 18 CRYPTOCURRENCIES
Innovative Cobinhood platform
is a crypto game-changer
A new player has entered the cryptocurrency market, putting the crypto community at the heart of its business model
T
ype “how to trade bitcoin” into
Google’s search engine and
it will return more than 150
million results. With an over-
whelming amount of advice, it can
seem like a minefield deciding where to
buy and exchange the original decen-
tralised cryptocurrency, launched
almost a decade ago, in early-2009,
and the hundreds, if not thousands, of
cryptos it has spawned.
At the end of a year in which inter-
est in cryptos well and truly flowed
into the mainstream of public con-
sciousness, it reached its high-water
mark in December 2017. According to
CoinDesk, a leading authority in crypto
news, one bitcoin was valued at just
over $1,000 on New Year’s Day 2017 and
by mid-December it peaked at just shy
of $20,000.
Although there has been a pullback
in the cryptocurrency markets in the
first half of 2018, experienced traders
are still jostling with first-time depos-
itors and others seeking safe-haven
assets in a scramble to invest in bit-
coin, as well as other major cryptos,
including ether, XRP, bitcoin cash and
newer “altcoins”. With prices low, they
reason, now is the time to speculate.
This demand to invest has triggered an
initial coin offering (ICO) phenomenon.
While there are numerous exciting suc-
cess stories, some investors have been
stung financially, by throwing money at
poorly thought-through crypto pro-
jects or worse, scams.
Indeed, there is a certain level
of risk in investing in a largely
unregulated asset class, such as
cryptocurrencies, and there are infa-
mous stories of major hacks. In early-
2014, for instance, the Mt Gox bitcoin
exchange was handling more than 70
per cent of all bitcoin transactions
worldwide. In the February of that
year it suspended trading and closed
its exchange service after announc-
ing approximately 850,000 bitcoins,
worth $450 million, belonging to both
customers and the organisation were
missing, probably stolen.
Cybersecurity has improved consid-
erably since, though, and exchanges, by
and large, have more robust defences
to keep cybercriminals at bay. For
those looking to buy and trade cryp-
tos, there are other things to look out
for, not least hidden charges enforced
by many exchanges for trading; this is
normally around 0.2 per cent of every
transaction. In short, investing in cryp-
tos is neither straightforward nor inex-
pensive, if you are not careful.
Thankfully, a new player entered the
market in August 2017 and is chang-
ing the game for the better, by putting
the crypto community at the heart of
its business model. Cobinhood, head-
quartered in Taiwan, from where many
of the planet’s best software engineers
hail, is “the world’s first platform to
combine a zero trading-fee cryptocur-
rency exchange and an ICO service”,
according to Popo Chen, Cobinhood’s
founder and chief executive.
Already the exchange service –
the first product on the innovative
Cobinhood platform, which currently
offers over 60 tokens and more than
120 trading pairs – has attracted one
Commercial feature
Cobinhood is the world’s
first platform to combine
a zero trading-fee
cryptocurrency exchange
and an ICO service
million users, with 70 per cent logging
in from the Americas and Europe. No
doubt the unique zero trading-fees
offering is a significant driver. The
organisation is well prepared for fur-
ther rapid growth and vowed to bolster
its defences by introducing a digital
wallet within the next month.
“The Cobinhood exchange oper-
ates with high-level security,” says
Mr Chen. “Every crypto asset depos-
ited at Cobinhood will be stored in
an offline ‘multisig’ [multi-signature]
wallet. We estimate that 98 per cent of
these assets will be stored offline. Each
multisig ‘cold’ wallet consists of eight
hardware security modules (HSMs).
Transactions will require five out of the
eight HSMs to proceed, otherwise the
wallet will remain closed.”
Cobinhood’s business-to-business
ICO service, the second of the plat-
form’s burgeoning suite of products, is
even more encouraging for the crypto
community. Unlike the way the com-
pany charges zero trading fees from
users on the exchange, there is a cost
for prospective crypto developers to
Popo Chen
Chief executive, Cobinhood
community and only launch high-qual-
ity, promising ICOs.”
For example, CyberMiles, a block-
chain that aims to build a decentralised
ecosystem for ecommerce, has been
launched by Cobinhood. CyberMiles’
ICO sold out within 48 hours, having
raised more than 84,000 ether, pre-
cipitating a 300 per cent increase in
the CyberMiles token’s market price.
use Cobinhood’s expertise and brand
There is much more to come from
the Cobinhood platform. Its Dexon
endorsement, but it is well worth it. blockchain aims to solve the current
Currently, their ICO team receive blockchain technology’s low scalability,
about 20 requests a day for assis-
tance with anything from white papers
transaction latency and high transac-
tion fees. “We have found the answer,”
to large-scale publicity, though they says Mr Chen. Given Cobinhood’s
can provide an end-to-end solution impressive track record and standing in
if required. “Cobinhood’s ICO ser- the crypto community, achieved within
vice consists of business-model con-
sulting, smart-contract code review,
less than a year, few would doubt him.
legal compliance, deployment proce-
dures and marketing support,” says For more information please visit
Cobinhood co-founder and chief cobinhood.com
technology officer Wei-Ning Huang.
However, they are discerning and
ensure stringent due diligence is
completed before committing to any
ICO. “We are not interested in people
looking to make money quickly,” Mr
Huang explains. “We want to know
what they can contribute to the crypto
DEXON: COBINHOOD’S BLOCKCHAIN EVOLUTION
Launched at BlockShow Europe 2018 “Dexon will unleash the true
in Berlin last month, Dexon blockchain power of the decentralised
technology promises to be the “next- technology and cross the chasm
generation decentralised applications of the DApps era. Only with the
[DApps] ecosystem”, enthuses features provided by Dexon, especially
Cobinhood’s Popo Chen. “It has infinite the scalability and interchain
scalability, low transaction processing operability, can blockchain be used
latency with negligible transaction fees to support real-world applications.
and energy-efficient Dexon blocklattice Therefore, everyone will benefit
technology. It solves the existing from Dexon because it’s a key to
problems of blockchain, including non- the decentralised future, just as
scalable, miner centralisation, energy smartphones and app store enables
inefficiency and unfairness. the world of apps we’re in now.”
USER EXPERIENCE
Chesnot/Getty Images
Balancing
FINBARR TOESLAND
C
onsumers around the
security
world are becoming
increasingly used to the
slick interfaces offered
by the likes of Netflix, Amazon
and usability
and Spotify. It may be undeniable
that the technologies supporting
these platforms are innovative, but
without such smooth user experi-
ences, it’s unlikely they would have
reached such widespread adoption
or prevailed over competitors. As
Cryptocurrency companies need to cryptocurrency moves closer to a
tipping point, more work needs to
improve security, but not at the expense of be done to improve usability, at the
equally important user experience same time as maintaining a robust
security system.
In the early days of cryptocur-
rency, investors who believed in
its power were willing to make the
effort to understand this poten-
tially groundbreaking digital
asset. “At its inception, the crypto-
currency interfaces were probably
a minor annoyance to overcome,
however this becomes far more
important as they hit the main-
stream,” says Alisdair Faulkner,
chief products officer at security
technology firm ThreatMetrix. “As
with any industry, the exchanges
that flourish will be the ones
offering the best online experience
and the easiest authentication pro-
cess, all without compromising
user safety and security.”
Retail cryptocurrency investors
and traders have a different set
of expectations than experienced
crypto investors. Newer inves-
tors expect the platforms they use
to purchase digital currencies to
offer a similar level of simplicity,
security and speed as traditional
payment solutions from banks.
Yet traditional financial institu-
tions have had decades to perfect
their payment platforms to meet
regulations, whereas the vast
majority of cryptocurrency plat-
forms and exchanges are only a
few years old and have little expe-
rience of dealing with often com-
plex regulations.
“Right now, the biggest problem
is that companies in the cryptocur-
rency space are new to the whole
work of KYC (know-your-customer)
verification. There are no quick
passes around the regulatory struc-
ture that is in place today for KYC
and anti-money-laundering rules.
This puts firms that already have
verified customer relationships in
a position of key advantage,” says
Paul Brody, EY global innovation
blockchain leader.
Many crypto companies are
just beginning to put procedures
in place to meet essential regu-
lations across different jurisdic-
tions. However, due to the volatile
nature of some cryptocurrencies,
there is a limit to what digital cur-
rency platforms can do to make the
purchasing process easier, until a
more comprehensive framework is
created by government. For exam-
ple, exchanges have no power to
change the decision by major UK,
Australian and US banks to ban
investors from buying cryptocur-
rencies on their credit cards.
As the crypto ecosystem contin-
ues to mature, it’s increasingly
clear that sophisticated techno-
logical tools are necessary to shift
the security burden away from the
user. Moving away from a reactive
security framework towards a pro-
active approach, where companies
utilise all available data to gain
better insights into potentially
fraudulent behaviour, is the next
step for the industry. By imple-
menting practically real-time ana-
lytics solutions, companies will
have the power to identify mali-
cious actors, without undermining
the user experience.
“Organisations are now embrac-
ing the latest technology innova-
tions that assess digital identity
based upon the historical behav-
iour of a user, as seen across mul-
tiple websites and apps. This is
done in a way that is completely
behind the scenes and asks for no
additional steps from a user,” says
Mr Faulkner.
For this method to be successful,
he says, every phase of the customer
journey, from account creation,
log-in to purchasing, must be mon-
itored to ensure all relevant data
is collected and a consistent deci-
sion-making process is followed.
RACONTEUR.NET 19
The use of technology is only a
single part of the strategy needed
by cryptocurrency firms to bal-
ance user protections and usability
more effectively, with efficient staff
who are able to process applica-
tions quickly and accurately being
equally important. Digital cur-
rency exchange Coinbase is one of
the most established platforms in
the industry and has seen first hand
how crucial the human element is
in creating a smooth user experi-
ence, especially at a time of unprec-
edented growth in the cryptocur-
rency ecosystem
“As part of that surge, consumer
demand for Coinbase increased 40
times and we experienced trans-
action volumes in November and
December last year that grew by 295
per cent,” says Zeeshan Feroz, UK
chief executive of Coinbase. “We
now have over 600 support agents
working on our queues across three
different locations and we offer
phone support 24 hours a day, seven
days a week.”
The exchanges that
flourish will be the
ones offering the best
online experience
and the easiest
authentication
process, all without
compromising user
safety and security
In some cases, human judgment
will be required to process verifica-
tion requests and to determine what
transactions may be problematic.
By increasing the support team,
Coinbase has been able to resolve
customer issues faster and reduced
the backlog that had built up by 95
per cent.
Reconciling customer needs with
security requirements will be a
continual process for cryptocur-
rency firms. From adopting the pay-
ment industry PCI-DSS certification
standard for incorporating biomet-
rics, two-factor authentication and
device confirmation, digital cur-
rency platforms can help enhance
usability without placing complex
barriers in front of the user.
“As with any new technology,
it is vital that the user experi-
ence facilitates adoption. Users
are already on a steep learning
curve when they first decide to
engage with cryptocurrency and
a bad user experience can put
them off for months or give them
a negative perception of a brand.
Getting the user experience right
should be a key focus of all ser-
vice providers,” concludes Pavel
Matveev, chief executive and
co-founder of cryptocurrency
wallet provider Wirex.
 18 CRYPTOCURRENCIES
Innovative Cobinhood platform
is a crypto game-changer
A new player has entered the cryptocurrency market, putting the crypto community at the heart of its business model
T
ype “how to trade bitcoin” into
Google’s search engine and
it will return more than 150
million results. With an over-
whelming amount of advice, it can
seem like a minefield deciding where to
buy and exchange the original decen-
tralised cryptocurrency, launched
almost a decade ago, in early-2009,
and the hundreds, if not thousands, of
cryptos it has spawned.
At the end of a year in which inter-
est in cryptos well and truly flowed
into the mainstream of public con-
sciousness, it reached its high-water
mark in December 2017. According to
CoinDesk, a leading authority in crypto
news, one bitcoin was valued at just
over $1,000 on New Year’s Day 2017 and
by mid-December it peaked at just shy
of $20,000.
Although there has been a pullback
in the cryptocurrency markets in the
first half of 2018, experienced traders
are still jostling with first-time depos-
itors and others seeking safe-haven
assets in a scramble to invest in bit-
coin, as well as other major cryptos,
including ether, XRP, bitcoin cash and
newer “altcoins”. With prices low, they
reason, now is the time to speculate.
This demand to invest has triggered an
initial coin offering (ICO) phenomenon.
While there are numerous exciting suc-
cess stories, some investors have been
stung financially, by throwing money at
poorly thought-through crypto pro-
jects or worse, scams.
Indeed, there is a certain level
of risk in investing in a largely
unregulated asset class, such as
cryptocurrencies, and there are infa-
mous stories of major hacks. In early-
2014, for instance, the Mt Gox bitcoin
exchange was handling more than 70
per cent of all bitcoin transactions
worldwide. In the February of that
year it suspended trading and closed
its exchange service after announc-
ing approximately 850,000 bitcoins,
worth $450 million, belonging to both
customers and the organisation were
missing, probably stolen.
Cybersecurity has improved consid-
erably since, though, and exchanges, by
and large, have more robust defences
to keep cybercriminals at bay. For
those looking to buy and trade cryp-
tos, there are other things to look out
for, not least hidden charges enforced
by many exchanges for trading; this is
normally around 0.2 per cent of every
transaction. In short, investing in cryp-
tos is neither straightforward nor inex-
pensive, if you are not careful.
Thankfully, a new player entered the
market in August 2017 and is chang-
ing the game for the better, by putting
the crypto community at the heart of
its business model. Cobinhood, head-
quartered in Taiwan, from where many
of the planet’s best software engineers
hail, is “the world’s first platform to
combine a zero trading-fee cryptocur-
rency exchange and an ICO service”,
according to Popo Chen, Cobinhood’s
founder and chief executive.
Already the exchange service –
the first product on the innovative
Cobinhood platform, which currently
offers over 60 tokens and more than
120 trading pairs – has attracted one
Commercial feature
Cobinhood is the world’s
first platform to combine
a zero trading-fee
cryptocurrency exchange
and an ICO service
million users, with 70 per cent logging
in from the Americas and Europe. No
doubt the unique zero trading-fees
offering is a significant driver. The
organisation is well prepared for fur-
ther rapid growth and vowed to bolster
its defences by introducing a digital
wallet within the next month.
“The Cobinhood exchange oper-
ates with high-level security,” says
Mr Chen. “Every crypto asset depos-
ited at Cobinhood will be stored in
an offline ‘multisig’ [multi-signature]
wallet. We estimate that 98 per cent of
these assets will be stored offline. Each
multisig ‘cold’ wallet consists of eight
hardware security modules (HSMs).
Transactions will require five out of the
eight HSMs to proceed, otherwise the
wallet will remain closed.”
Cobinhood’s business-to-business
ICO service, the second of the plat-
form’s burgeoning suite of products, is
even more encouraging for the crypto
community. Unlike the way the com-
pany charges zero trading fees from
users on the exchange, there is a cost
for prospective crypto developers to
Popo Chen
Chief executive, Cobinhood
community and only launch high-qual-
ity, promising ICOs.”
For example, CyberMiles, a block-
chain that aims to build a decentralised
ecosystem for ecommerce, has been
launched by Cobinhood. CyberMiles’
ICO sold out within 48 hours, having
raised more than 84,000 ether, pre-
cipitating a 300 per cent increase in
the CyberMiles token’s market price.
use Cobinhood’s expertise and brand
There is much more to come from
the Cobinhood platform. Its Dexon
endorsement, but it is well worth it. blockchain aims to solve the current
Currently, their ICO team receive blockchain technology’s low scalability,
about 20 requests a day for assis-
tance with anything from white papers
transaction latency and high transac-
tion fees. “We have found the answer,”
to large-scale publicity, though they says Mr Chen. Given Cobinhood’s
can provide an end-to-end solution impressive track record and standing in
if required. “Cobinhood’s ICO ser- the crypto community, achieved within
vice consists of business-model con-
sulting, smart-contract code review,
less than a year, few would doubt him.
legal compliance, deployment proce-
dures and marketing support,” says For more information please visit
Cobinhood co-founder and chief cobinhood.com
technology officer Wei-Ning Huang.
However, they are discerning and
ensure stringent due diligence is
completed before committing to any
ICO. “We are not interested in people
looking to make money quickly,” Mr
Huang explains. “We want to know
what they can contribute to the crypto
DEXON: COBINHOOD’S BLOCKCHAIN EVOLUTION
Launched at BlockShow Europe 2018 “Dexon will unleash the true
in Berlin last month, Dexon blockchain power of the decentralised
technology promises to be the “next- technology and cross the chasm
generation decentralised applications of the DApps era. Only with the
[DApps] ecosystem”, enthuses features provided by Dexon, especially
Cobinhood’s Popo Chen. “It has infinite the scalability and interchain
scalability, low transaction processing operability, can blockchain be used
latency with negligible transaction fees to support real-world applications.
and energy-efficient Dexon blocklattice Therefore, everyone will benefit
technology. It solves the existing from Dexon because it’s a key to
problems of blockchain, including non- the decentralised future, just as
scalable, miner centralisation, energy smartphones and app store enables
inefficiency and unfairness. the world of apps we’re in now.”
USER EXPERIENCE
Chesnot/Getty Images
Balancing
FINBARR TOESLAND
C
onsumers around the
security
world are becoming
increasingly used to the
slick interfaces offered
by the likes of Netflix, Amazon
and usability
and Spotify. It may be undeniable
that the technologies supporting
these platforms are innovative, but
without such smooth user experi-
ences, it’s unlikely they would have
reached such widespread adoption
or prevailed over competitors. As
Cryptocurrency companies need to cryptocurrency moves closer to a
tipping point, more work needs to
improve security, but not at the expense of be done to improve usability, at the
equally important user experience same time as maintaining a robust
security system.
In the early days of cryptocur-
rency, investors who believed in
its power were willing to make the
effort to understand this poten-
tially groundbreaking digital
asset. “At its inception, the crypto-
currency interfaces were probably
a minor annoyance to overcome,
however this becomes far more
important as they hit the main-
stream,” says Alisdair Faulkner,
chief products officer at security
technology firm ThreatMetrix. “As
with any industry, the exchanges
that flourish will be the ones
offering the best online experience
and the easiest authentication pro-
cess, all without compromising
user safety and security.”
Retail cryptocurrency investors
and traders have a different set
of expectations than experienced
crypto investors. Newer inves-
tors expect the platforms they use
to purchase digital currencies to
offer a similar level of simplicity,
security and speed as traditional
payment solutions from banks.
Yet traditional financial institu-
tions have had decades to perfect
their payment platforms to meet
regulations, whereas the vast
majority of cryptocurrency plat-
forms and exchanges are only a
few years old and have little expe-
rience of dealing with often com-
plex regulations.
“Right now, the biggest problem
is that companies in the cryptocur-
rency space are new to the whole
work of KYC (know-your-customer)
verification. There are no quick
passes around the regulatory struc-
ture that is in place today for KYC
and anti-money-laundering rules.
This puts firms that already have
verified customer relationships in
a position of key advantage,” says
Paul Brody, EY global innovation
blockchain leader.
Many crypto companies are
just beginning to put procedures
in place to meet essential regu-
lations across different jurisdic-
tions. However, due to the volatile
nature of some cryptocurrencies,
there is a limit to what digital cur-
rency platforms can do to make the
purchasing process easier, until a
more comprehensive framework is
created by government. For exam-
ple, exchanges have no power to
change the decision by major UK,
Australian and US banks to ban
investors from buying cryptocur-
rencies on their credit cards.
As the crypto ecosystem contin-
ues to mature, it’s increasingly
clear that sophisticated techno-
logical tools are necessary to shift
the security burden away from the
user. Moving away from a reactive
security framework towards a pro-
active approach, where companies
utilise all available data to gain
better insights into potentially
fraudulent behaviour, is the next
step for the industry. By imple-
menting practically real-time ana-
lytics solutions, companies will
have the power to identify mali-
cious actors, without undermining
the user experience.
“Organisations are now embrac-
ing the latest technology innova-
tions that assess digital identity
based upon the historical behav-
iour of a user, as seen across mul-
tiple websites and apps. This is
done in a way that is completely
behind the scenes and asks for no
additional steps from a user,” says
Mr Faulkner.
For this method to be successful,
he says, every phase of the customer
journey, from account creation,
log-in to purchasing, must be mon-
itored to ensure all relevant data
is collected and a consistent deci-
sion-making process is followed.
RACONTEUR.NET 19
The use of technology is only a
single part of the strategy needed
by cryptocurrency firms to bal-
ance user protections and usability
more effectively, with efficient staff
who are able to process applica-
tions quickly and accurately being
equally important. Digital cur-
rency exchange Coinbase is one of
the most established platforms in
the industry and has seen first hand
how crucial the human element is
in creating a smooth user experi-
ence, especially at a time of unprec-
edented growth in the cryptocur-
rency ecosystem
“As part of that surge, consumer
demand for Coinbase increased 40
times and we experienced trans-
action volumes in November and
December last year that grew by 295
per cent,” says Zeeshan Feroz, UK
chief executive of Coinbase. “We
now have over 600 support agents
working on our queues across three
different locations and we offer
phone support 24 hours a day, seven
days a week.”
The exchanges that
flourish will be the
ones offering the best
online experience
and the easiest
authentication
process, all without
compromising user
safety and security
In some cases, human judgment
will be required to process verifica-
tion requests and to determine what
transactions may be problematic.
By increasing the support team,
Coinbase has been able to resolve
customer issues faster and reduced
the backlog that had built up by 95
per cent.
Reconciling customer needs with
security requirements will be a
continual process for cryptocur-
rency firms. From adopting the pay-
ment industry PCI-DSS certification
standard for incorporating biomet-
rics, two-factor authentication and
device confirmation, digital cur-
rency platforms can help enhance
usability without placing complex
barriers in front of the user.
“As with any new technology,
it is vital that the user experi-
ence facilitates adoption. Users
are already on a steep learning
curve when they first decide to
engage with cryptocurrency and
a bad user experience can put
them off for months or give them
a negative perception of a brand.
Getting the user experience right
should be a key focus of all ser-
vice providers,” concludes Pavel
Matveev, chief executive and
co-founder of cryptocurrency
wallet provider Wirex.
20 CRYPTOCURRENCIES RACONTEUR.NET 21

BEGINNINGS

Repairing da mage and restoring reputation

In the early days, Percentage of bitcoins sent to conversion services originating from illicit entities

F8 studio/Shutterstock
cryptocurrencies Conversion services are platforms where users convert bitcoins to fiat currency/
cryptocurrency or move the bitcoins to another bitcoin address accessible to the user ALL YEARS
may have been 22.57 29.26 24.07 16.03

misused by the
5
underworld, but ATM Gambling Percentage of
all transactions

criminals should Bitcoin exchange

Crypto exchange
Mixer*

Multi-service
watch out as cryptos 4

come clean

DAVID COWAN

W
ith the controversy and
confusion surround-
ing cryptocurrencies,
it is easy to forget that
there is nothing inherently illegal
in them. Tom Robinson, co-founder
and chief data officer at Elliptic,
says: “It is true the reputation at
the moment is that cryptocurrency
is the payment means of choice for
scammers, terrorists and criminals.
But we have to put this into perspec-
tive. The biggest use is speculation.”
If the reputation of cryptocur-
rency is to change then it needs to
go beyond regulation and build sys-
tems with integrity which consum-
ers and professionals can have con-
fidence in and trust.
Regulation and monitoring the
professional players is certainly
part of building this reputation. Dr
Robinson says: “Changing the repu-
tation will come by having good reg-
ulation and ensuring every issuer is
doing good due diligence.” The big-
gest problem for law enforcement is
the many unregulated exchanges,
where criminal users can stealth-
ily navigate their way through
the crowd of legitimate transac-
tions. US Securities and Exchange
Commission chairman Jay Clayton
recently called out the “gatekeep-
ers”, such as exchanges, bankers
Dark web acceptance of major cryptos
Study of 150 message boards, marketplaces and illicit services; percentage of
vendors accepting the following as payment
Blockchain
media sites
White papers 30
Reddit 20
Twitter 13
GitHub 9 out having to identify their prove-
Crypto hedge
funds
6 Recorded Future 2018
and lawyers, among the bad actors
in initial coin offerings.
If change is to come, Dr Andrei
Kirilenko, director of the Centre for
Global Finance and Technology at
Imperial College Business School in
London, says: “There are two scenar-
ios; a negative and a positive one. The
negative one is where a very large
global bank is hacked and so people
can no longer say a bank is any safer
than cryptocurrency. The positive is
that crypto becomes a regulated asset
class which attracts serious investors.”
Like any market handling money,
cryptocurrency will always attract
scammers and the like, but most
users should have the confidence
that this is a safe and useful space
for them to occupy. It is said every
100
Changing the reputation will
come by having good regulation
and ensuring every issuer is
doing good due diligence
US dollar note has drug residue on
it, but this does not make everyone
handling US currency drug-runners.
It is this level of understanding that
cryptocurrency is striving for, which
means accepting there will always be
abuses. What reputation in finance
amounts to is robust integrity and
confidence in the means with low
negative impact on the consumer.
The foundational work for build-
ing such a reputation is one for
IT specialists and forensic crime
experts. Cryptocurrency uses tech-
nology to transfer value outside
the institutional financial system.
Criminals were early-adopters of
bitcoin because they believed dig-
ital currencies were untraceable
and completely anonymous. To sign
up in the cryptocurrency world is
easy, you simply need an address
using a random string of letters
and numbers, and you can have as
many addresses as you wish. These
addresses can be tied together with-
nance. The funds involved can be
transferred without intermediaries
and across jurisdictions with ease.
The foundational element of the
blockchain structure is the cryp-
tographic protocol that chains data
together without which you have no
blockchain. The structure of block-
chain then creates the barriers for
forensics, but they are also the means
towards detection. Dr Kirilenko says:
“Blockchain is public; anyone can
see the balances at all times. They
don’t know who it is, but they can
see it. This is an interesting reversal.
We usually know little about the bal-
ances of others. Because you can see
the chain, you can do profiling exer-
cises, look at certain profiles and link
them together.”
Away from all the headlines and
hype, the reality is that cryptocur-
rency networks are less private than
criminals thought. In fact, crypto
offers pseudonymity rather than
anonymity. Dr Robinson explains:
“There is a pseudonym, but this can
be ultimately tied to a real-world
identity.” Forensic investigators are
able to trace illegal behaviour and
misconduct by using a range of new
forensic tools, detecting patterns
across cryptocurrency networks
and, as the old adage in crime goes,
“follow the money”.
Each transaction is recorded in a
distributed public ledger and can
thus be tracked, and anyone can
download the entire transaction
history for examination. A 2018
study by Elliptic and the Center on
Sanctions and Illicit Finance, a US
think tank, found a fivefold increase
in the number of large-scale illegal
operations working on the bitcoin
2
1
0
2013 2014
*Online software service to swap bitcoins for ones with
a different transaction history, effectively laundering them
blockchain between 2013 and 2016.
They analysed the history of more
than 500,000 bitcoins, identified
102 criminal entities and demon-
strated positive links back to them.
Elliptic provides investiga-
tors, including the major govern-
ment enforcement agencies and
exchanges, software to screen trans-
actions multiple times, checking for
links to ransomware wallets, dark
marketplaces and so on. The 24/7
nature of operations means rerun-
ning analyses on older transac-
tions can help trace updated suspect
accounts. Dr Robinson estimates
a trillion dollars’ worth of bitcoin
transactions have been screened
using its software since start-
ing operations five years ago. He
explains: “Blockchain is a concrete
Insight
Law enforcement
Like poachers turned gamekeepers, the
academic researchers who helped create
the encryption and software systems that
made bitcoin possible are now helping law
enforcement to detect criminal activity.
These experts operate at the crossroads of
computer science, economics and forensics.
Academic centres across the world, from Imperial
College London to the University of Sydney, are
using artificial intelligence (AI) to identify crypto
transactions linked to criminal behaviour.
Startups like Chainalysis and Elliptic are putting
AI and machine-learning tools into the hands of
2015 2016
Elliptic/Center on Sanctions and Illicit Finance 2017
database of every transaction and card stolen, you don’t stop using it. It
address, so we can assign identities has low impact. Until crypto gets to
to those real-world identities, which a similar level, where people are not
law enforcement can then trace.” losing these sums of money, there
Regulation and tackling the impact will always be a question mark.”
of illegal use lies at the heart of mak-
ing cryptocurrency mainstream.
However, Mr Bisanz concludes: “The
safeguards and protections will
Matt Bisanz, financial services reg- come; they will inspire confidence.”
ulatory and enforcement associ- Once we have integrity in the
ate at Mayer Brown in Washington, technology and the trading process
explains the reputation damage of then markets will be much safer.
cryptocurrency. “The situation is Dr Kirilenko is confident about the
unsustainable,” he says. “The anal- future. He says: “There is a lot of
ogy is if there were daily bank rob- ingenuity coming into the crypto
beries in New York, getting away with space, which is really encouraging.
hold-ups. There was a time when this What is extremely positive is the
was common, in the wild west. amount of development talent that
“We still have to put more in place goes into it, which is very significant
to build confidence, where crimes and suggests to me crypto assets
are rare or have little effect on the have a high probability of succeed-
consumer. When you get your credit ing in the long term.”
law enforcement agencies to anaylse profiles,
cluster addresses and detect patterns.
Dr Andrei Kirilenko, of Imperial College
Business School, says: “Detection is critical, but
it is also what blockchain excels in, and the use of
AI is enhancing this forensic work.”
Every transaction made using cryptocurrency
is logged on the blockchain, which is a publicly
available ledger. AI and machine-learning
algorithms can be used to augment the
blockchain to produce superior cryptocurrency
intelligence. It doesn’t store identities, but
every user has an associated wallet that is
recorded alongside the transaction. The AI tool
can search the blockchain to identify the wallet
that corresponds to a real-world identity.
20 CRYPTOCURRENCIES RACONTEUR.NET 21

BEGINNINGS

Repairing da mage and restoring reputation

In the early days, Percentage of bitcoins sent to conversion services originating from illicit entities

F8 studio/Shutterstock
cryptocurrencies Conversion services are platforms where users convert bitcoins to fiat currency/
cryptocurrency or move the bitcoins to another bitcoin address accessible to the user ALL YEARS
may have been 22.57 29.26 24.07 16.03

misused by the
5
underworld, but ATM Gambling Percentage of
all transactions

criminals should Bitcoin exchange

Crypto exchange
Mixer*

Multi-service
watch out as cryptos 4

come clean

DAVID COWAN

W
ith the controversy and
confusion surround-
ing cryptocurrencies,
it is easy to forget that
there is nothing inherently illegal
in them. Tom Robinson, co-founder
and chief data officer at Elliptic,
says: “It is true the reputation at
the moment is that cryptocurrency
is the payment means of choice for
scammers, terrorists and criminals.
But we have to put this into perspec-
tive. The biggest use is speculation.”
If the reputation of cryptocur-
rency is to change then it needs to
go beyond regulation and build sys-
tems with integrity which consum-
ers and professionals can have con-
fidence in and trust.
Regulation and monitoring the
professional players is certainly
part of building this reputation. Dr
Robinson says: “Changing the repu-
tation will come by having good reg-
ulation and ensuring every issuer is
doing good due diligence.” The big-
gest problem for law enforcement is
the many unregulated exchanges,
where criminal users can stealth-
ily navigate their way through
the crowd of legitimate transac-
tions. US Securities and Exchange
Commission chairman Jay Clayton
recently called out the “gatekeep-
ers”, such as exchanges, bankers
Dark web acceptance of major cryptos
Study of 150 message boards, marketplaces and illicit services; percentage of
vendors accepting the following as payment
Blockchain
media sites
White papers 30
Reddit 20
Twitter 13
GitHub 9 out having to identify their prove-
Crypto hedge
funds
6 Recorded Future 2018
and lawyers, among the bad actors
in initial coin offerings.
If change is to come, Dr Andrei
Kirilenko, director of the Centre for
Global Finance and Technology at
Imperial College Business School in
London, says: “There are two scenar-
ios; a negative and a positive one. The
negative one is where a very large
global bank is hacked and so people
can no longer say a bank is any safer
than cryptocurrency. The positive is
that crypto becomes a regulated asset
class which attracts serious investors.”
Like any market handling money,
cryptocurrency will always attract
scammers and the like, but most
users should have the confidence
that this is a safe and useful space
for them to occupy. It is said every
100
Changing the reputation will
come by having good regulation
and ensuring every issuer is
doing good due diligence
US dollar note has drug residue on
it, but this does not make everyone
handling US currency drug-runners.
It is this level of understanding that
cryptocurrency is striving for, which
means accepting there will always be
abuses. What reputation in finance
amounts to is robust integrity and
confidence in the means with low
negative impact on the consumer.
The foundational work for build-
ing such a reputation is one for
IT specialists and forensic crime
experts. Cryptocurrency uses tech-
nology to transfer value outside
the institutional financial system.
Criminals were early-adopters of
bitcoin because they believed dig-
ital currencies were untraceable
and completely anonymous. To sign
up in the cryptocurrency world is
easy, you simply need an address
using a random string of letters
and numbers, and you can have as
many addresses as you wish. These
addresses can be tied together with-
nance. The funds involved can be
transferred without intermediaries
and across jurisdictions with ease.
The foundational element of the
blockchain structure is the cryp-
tographic protocol that chains data
together without which you have no
blockchain. The structure of block-
chain then creates the barriers for
forensics, but they are also the means
towards detection. Dr Kirilenko says:
“Blockchain is public; anyone can
see the balances at all times. They
don’t know who it is, but they can
see it. This is an interesting reversal.
We usually know little about the bal-
ances of others. Because you can see
the chain, you can do profiling exer-
cises, look at certain profiles and link
them together.”
Away from all the headlines and
hype, the reality is that cryptocur-
rency networks are less private than
criminals thought. In fact, crypto
offers pseudonymity rather than
anonymity. Dr Robinson explains:
“There is a pseudonym, but this can
be ultimately tied to a real-world
identity.” Forensic investigators are
able to trace illegal behaviour and
misconduct by using a range of new
forensic tools, detecting patterns
across cryptocurrency networks
and, as the old adage in crime goes,
“follow the money”.
Each transaction is recorded in a
distributed public ledger and can
thus be tracked, and anyone can
download the entire transaction
history for examination. A 2018
study by Elliptic and the Center on
Sanctions and Illicit Finance, a US
think tank, found a fivefold increase
in the number of large-scale illegal
operations working on the bitcoin
2
1
0
2013 2014
*Online software service to swap bitcoins for ones with
a different transaction history, effectively laundering them
blockchain between 2013 and 2016.
They analysed the history of more
than 500,000 bitcoins, identified
102 criminal entities and demon-
strated positive links back to them.
Elliptic provides investiga-
tors, including the major govern-
ment enforcement agencies and
exchanges, software to screen trans-
actions multiple times, checking for
links to ransomware wallets, dark
marketplaces and so on. The 24/7
nature of operations means rerun-
ning analyses on older transac-
tions can help trace updated suspect
accounts. Dr Robinson estimates
a trillion dollars’ worth of bitcoin
transactions have been screened
using its software since start-
ing operations five years ago. He
explains: “Blockchain is a concrete
Insight
Law enforcement
Like poachers turned gamekeepers, the
academic researchers who helped create
the encryption and software systems that
made bitcoin possible are now helping law
enforcement to detect criminal activity.
These experts operate at the crossroads of
computer science, economics and forensics.
Academic centres across the world, from Imperial
College London to the University of Sydney, are
using artificial intelligence (AI) to identify crypto
transactions linked to criminal behaviour.
Startups like Chainalysis and Elliptic are putting
AI and machine-learning tools into the hands of
2015 2016
Elliptic/Center on Sanctions and Illicit Finance 2017
database of every transaction and card stolen, you don’t stop using it. It
address, so we can assign identities has low impact. Until crypto gets to
to those real-world identities, which a similar level, where people are not
law enforcement can then trace.” losing these sums of money, there
Regulation and tackling the impact will always be a question mark.”
of illegal use lies at the heart of mak-
ing cryptocurrency mainstream.
However, Mr Bisanz concludes: “The
safeguards and protections will
Matt Bisanz, financial services reg- come; they will inspire confidence.”
ulatory and enforcement associ- Once we have integrity in the
ate at Mayer Brown in Washington, technology and the trading process
explains the reputation damage of then markets will be much safer.
cryptocurrency. “The situation is Dr Kirilenko is confident about the
unsustainable,” he says. “The anal- future. He says: “There is a lot of
ogy is if there were daily bank rob- ingenuity coming into the crypto
beries in New York, getting away with space, which is really encouraging.
hold-ups. There was a time when this What is extremely positive is the
was common, in the wild west. amount of development talent that
“We still have to put more in place goes into it, which is very significant
to build confidence, where crimes and suggests to me crypto assets
are rare or have little effect on the have a high probability of succeed-
consumer. When you get your credit ing in the long term.”
law enforcement agencies to anaylse profiles,
cluster addresses and detect patterns.
Dr Andrei Kirilenko, of Imperial College
Business School, says: “Detection is critical, but
it is also what blockchain excels in, and the use of
AI is enhancing this forensic work.”
Every transaction made using cryptocurrency
is logged on the blockchain, which is a publicly
available ledger. AI and machine-learning
algorithms can be used to augment the
blockchain to produce superior cryptocurrency
intelligence. It doesn’t store identities, but
every user has an associated wallet that is
recorded alongside the transaction. The AI tool
can search the blockchain to identify the wallet
that corresponds to a real-world identity.
22 CRYPTOCURRENCIES
RISK
katjen/Shutterstock
Show caution
when seeking
high rewards
Cryptocurrencies are prone to high
volatility and low liquidity, making
risk tough to manage, but the rewards
can be high
JOEL CLARK
M
anaging risk in finan-
cial markets is a well-es-
tablished discipline.
Whether investing in
equities, bonds or currencies, widely
accepted practices protect market
practitioners when they are buying,
selling or intermediating. Risks are
typically aligned into different cate-
gories, including market risk, credit
risk and operational risk, and com-
plex formulae are used to determine
how much capital should be kept in
reserve to absorb losses.
When investing in cryptocurren-
cies, however, many of these tra-
ditional assumptions fall flat. The
product is still new and relatively
untested, volatility is unpredictable
and, with a small, albeit growing,
investor base, the market is much
less liquid, making it tougher to
unwind positions. This doesn’t mean
investors should avoid cryptocurren-
cies altogether, but it does necessi-
tate a different approach to risk.
“Volatility and unpredictable
liquidity are a reality of this mar-
ket. Sadly, with weak governance,
fraud is also a real possibility. This
is compounded with new currencies
proliferating at an extraordinary
pace, as the barriers to entry for an
initial coin offering are very low,”
says Richard Longmore, managing
director of capital markets consul-
tancy Finoesis and formerly a senior
manager in fi xed income, currencies
and commodities at UBS.
The risks may be different and
tougher to manage, but as in any
financial market, participants
need to balance risk with reward.
Following a huge spike in the value
of bitcoin at the end of 2017 – it rose
from $7,000 to almost $20,000 –
some investors have already realised
huge gains. The attractive rewards
are luring new participants into the
market every day, including banks,
asset managers and hedge funds.
As these institutions move in, it
represents a landmark shift for this
emerging asset class, which had pre-
viously been largely the domain of
individual day traders who had lit-
tle to lose from dabbling in bitcoin.
For institutions, the risks can be
much greater, not least because they
are typically managing money on
behalf of others.
“Mark-to-market considerations are
clearly a large issue for institutional
investors. Volatility in these curren-
cies is a given and thus the danger of
stop losses triggered in a wild ride is
ever present,” says Mr Longmore.
“Consider also know-your-customer
and anti-money laundering require-
ments. Being what they are, cryptos
present enormous difficulties. An
individual investor might not have
too many concerns, but an institu-
tional investor runs considerable
risks from both a reputational view-
point and from possible sanctions.”
While volatility has eased since
the end of last year, the epic move
in bitcoin has increased risk appe-
tite both for existing and newer
participants, with the realisation
that even just a modest exposure to
cryptocurrencies could turn out to
be lucrative.
Even if only investing a small
proportion of the portfolio in cryp-
tocurrencies, however, investors
should be mindful of the risks they
face. Every practitioner will have
an opinion on what the biggest risk
may be, but few would contest that
the illiquidity of crypto assets is one
of the toughest risks to manage.
It is a reality in any emerging
asset class that until participa-
tion becomes mainstream and
widespread, liquidity is likely to
be unpredictable. This means that
while it may be easy to take on a
position and buy into a currency,
it can be much harder to unwind,
particularly at times when the
The most prudent
approach for new
investors might be
to hold just a very
small proportion
of their portfolio
in cryptocurrencies
Importance of the following datapoints when buying cryptocurrencies
Cryptocurrency investors were asked to rate the importance on a scale of zero to ten
Market capitalisation
Exchange volume
Number of exchanges
listing the coin
On-chain
transaction volume
Total future supply
of coins
Transaction fees
Total current supply
of coins
Hash power
Google trends
0 1
market is under stress and prices
are plummeting.
Simon Tobler, head of trading at
Swiss startup Crypto Finance AG,
likens it to trading currencies such
as the Argentine peso or Thai baht
in which there is far less turnover
and lower liquidity than in major
currencies. Before joining Crypto
Finance, which provides asset man-
agement, brokerage and storage
for crypto assets, he traded foreign
exchange options at Credit Suisse.
Mr Tobler says: “Bitcoin trades
more like emerging market curren-
cies than the majors, because it is
highly illiquid with few big mar-
ket makers and no corporate flow.
The illiquidity leads to sharp intra-
day moves, and makes it difficult to
manage your risks and adjust your
positions in real time.”
If the market continues to attract
new participants, liquidity should
improve, but this will take time, par-
ticularly for institutions that must
secure multiple approvals to trade
new products. Even then, their partic-
ipation is likely to be modest at first.
“Liquidity is increasing,” says
Gabriel Wang, analyst at research
and advisory fi rm Aite Group. “As
Investor bullishness
How investors used gains from cryptocurrencies in 2017; percentage of those
who realised gains only
84 31
Kept investing in Diversifed into
cryptocurrencies other assets
2 3 4 5
the market cap of cryptos is ris-
ing fairly quickly, market makers,
exchanges and over-the-counter
desks continue to pop up in the
market, and the current market size
has attracted more and more insti-
tutional interest and order flow.
This is driving up liquidity and
trading volume.”
Beyond liquidity, more idiosyn-
cratic risks should be considered.
In a market that is still developing,
there are legitimate concerns over
the potential for fraud and market
manipulation, so investors must
take necessary precautions. More
established assets such as bitcoin
or ethereum may be a safer bet than
the newer coins, for example.
Regulatory risk is also important,
as central banks and regulators
around the world have taken very
different stances on this evolving
asset class. In China, for example,
exchanges and financial institu-
tions have been banned from han-
dling crypto assets. While officials
in other countries may have been
less heavy handed, with most cen-
tral banks keeping a close watch on
the sector, further intervention is
always possible.
123 10
Paid debt Spent it
CoinDesk 2018
RACONTEUR.NET 23
6 7 8 9 10
CoinDesk 2018
“Political and regulatory risk
has declined as this space has
become more accepted, but inves-
tors should certainly be careful
when investing in the newer coins
because there is a risk of sudden
discontinuation or regulatory
intervention,” warns Mr Tobler.
Managing this unique combina-
tion of risks is not straightforward.
Whereas standard practice in finan-
cial markets would be to model
key risks and set aside capital for a
worst-case scenario, these idiosyn-
cratic risks are much more difficult
to measure and manage.
When investing in a high-risk
asset class, investors would typi-
cally diversify across multiple prod-
ucts, but this approach is difficult
in the crypto world as most coins
are very highly correlated as they
tend to move in the same direction.
Diversification, therefore, offers lit-
tle protection in the event of a sud-
den price move.
“Due diligence is always advised,
but in the world of cryptocurrencies,
the level required, given the land-
scape, is exponentially higher and
more difficult. A mindset change is
required not only from the require-
ments of a considerably more vola-
tile and illiquid market, but given its
extraordinary speed of evolution,”
says Mr Longmore.
Given the unpredictability of risk
and the potential for high returns,
the most prudent approach for new
investors might be to hold just
a very small proportion of their
portfolio in cryptocurrencies. This
would give some exposure without
excessive risk as the market con-
tinues to mature.
“By the end of 2017, a lot of portfo-
lio managers had to explain to their
clients why they had only achieved
single-digit returns in traditional
asset classes, while some crypto
funds had earned up to 2,000 per
cent from recent volatility. There
is ultimately little downside from
investing 1 per cent of the portfolio
in cryptocurrencies, but the poten-
tial upside is almost unlimited,” Mr
Tobler concludes.
22 CRYPTOCURRENCIES
RISK
katjen/Shutterstock
Show caution
when seeking
high rewards
Cryptocurrencies are prone to high
volatility and low liquidity, making
risk tough to manage, but the rewards
can be high
JOEL CLARK
M
anaging risk in finan-
cial markets is a well-es-
tablished discipline.
Whether investing in
equities, bonds or currencies, widely
accepted practices protect market
practitioners when they are buying,
selling or intermediating. Risks are
typically aligned into different cate-
gories, including market risk, credit
risk and operational risk, and com-
plex formulae are used to determine
how much capital should be kept in
reserve to absorb losses.
When investing in cryptocurren-
cies, however, many of these tra-
ditional assumptions fall flat. The
product is still new and relatively
untested, volatility is unpredictable
and, with a small, albeit growing,
investor base, the market is much
less liquid, making it tougher to
unwind positions. This doesn’t mean
investors should avoid cryptocurren-
cies altogether, but it does necessi-
tate a different approach to risk.
“Volatility and unpredictable
liquidity are a reality of this mar-
ket. Sadly, with weak governance,
fraud is also a real possibility. This
is compounded with new currencies
proliferating at an extraordinary
pace, as the barriers to entry for an
initial coin offering are very low,”
says Richard Longmore, managing
director of capital markets consul-
tancy Finoesis and formerly a senior
manager in fi xed income, currencies
and commodities at UBS.
The risks may be different and
tougher to manage, but as in any
financial market, participants
need to balance risk with reward.
Following a huge spike in the value
of bitcoin at the end of 2017 – it rose
from $7,000 to almost $20,000 –
some investors have already realised
huge gains. The attractive rewards
are luring new participants into the
market every day, including banks,
asset managers and hedge funds.
As these institutions move in, it
represents a landmark shift for this
emerging asset class, which had pre-
viously been largely the domain of
individual day traders who had lit-
tle to lose from dabbling in bitcoin.
For institutions, the risks can be
much greater, not least because they
are typically managing money on
behalf of others.
“Mark-to-market considerations are
clearly a large issue for institutional
investors. Volatility in these curren-
cies is a given and thus the danger of
stop losses triggered in a wild ride is
ever present,” says Mr Longmore.
“Consider also know-your-customer
and anti-money laundering require-
ments. Being what they are, cryptos
present enormous difficulties. An
individual investor might not have
too many concerns, but an institu-
tional investor runs considerable
risks from both a reputational view-
point and from possible sanctions.”
While volatility has eased since
the end of last year, the epic move
in bitcoin has increased risk appe-
tite both for existing and newer
participants, with the realisation
that even just a modest exposure to
cryptocurrencies could turn out to
be lucrative.
Even if only investing a small
proportion of the portfolio in cryp-
tocurrencies, however, investors
should be mindful of the risks they
face. Every practitioner will have
an opinion on what the biggest risk
may be, but few would contest that
the illiquidity of crypto assets is one
of the toughest risks to manage.
It is a reality in any emerging
asset class that until participa-
tion becomes mainstream and
widespread, liquidity is likely to
be unpredictable. This means that
while it may be easy to take on a
position and buy into a currency,
it can be much harder to unwind,
particularly at times when the
The most prudent
approach for new
investors might be
to hold just a very
small proportion
of their portfolio
in cryptocurrencies
Importance of the following datapoints when buying cryptocurrencies
Cryptocurrency investors were asked to rate the importance on a scale of zero to ten
Market capitalisation
Exchange volume
Number of exchanges
listing the coin
On-chain
transaction volume
Total future supply
of coins
Transaction fees
Total current supply
of coins
Hash power
Google trends
0 1
market is under stress and prices
are plummeting.
Simon Tobler, head of trading at
Swiss startup Crypto Finance AG,
likens it to trading currencies such
as the Argentine peso or Thai baht
in which there is far less turnover
and lower liquidity than in major
currencies. Before joining Crypto
Finance, which provides asset man-
agement, brokerage and storage
for crypto assets, he traded foreign
exchange options at Credit Suisse.
Mr Tobler says: “Bitcoin trades
more like emerging market curren-
cies than the majors, because it is
highly illiquid with few big mar-
ket makers and no corporate flow.
The illiquidity leads to sharp intra-
day moves, and makes it difficult to
manage your risks and adjust your
positions in real time.”
If the market continues to attract
new participants, liquidity should
improve, but this will take time, par-
ticularly for institutions that must
secure multiple approvals to trade
new products. Even then, their partic-
ipation is likely to be modest at first.
“Liquidity is increasing,” says
Gabriel Wang, analyst at research
and advisory fi rm Aite Group. “As
Investor bullishness
How investors used gains from cryptocurrencies in 2017; percentage of those
who realised gains only
84 31
Kept investing in Diversifed into
cryptocurrencies other assets
2 3 4 5
the market cap of cryptos is ris-
ing fairly quickly, market makers,
exchanges and over-the-counter
desks continue to pop up in the
market, and the current market size
has attracted more and more insti-
tutional interest and order flow.
This is driving up liquidity and
trading volume.”
Beyond liquidity, more idiosyn-
cratic risks should be considered.
In a market that is still developing,
there are legitimate concerns over
the potential for fraud and market
manipulation, so investors must
take necessary precautions. More
established assets such as bitcoin
or ethereum may be a safer bet than
the newer coins, for example.
Regulatory risk is also important,
as central banks and regulators
around the world have taken very
different stances on this evolving
asset class. In China, for example,
exchanges and financial institu-
tions have been banned from han-
dling crypto assets. While officials
in other countries may have been
less heavy handed, with most cen-
tral banks keeping a close watch on
the sector, further intervention is
always possible.
123 10
Paid debt Spent it
CoinDesk 2018
RACONTEUR.NET 23
6 7 8 9 10
CoinDesk 2018
“Political and regulatory risk
has declined as this space has
become more accepted, but inves-
tors should certainly be careful
when investing in the newer coins
because there is a risk of sudden
discontinuation or regulatory
intervention,” warns Mr Tobler.
Managing this unique combina-
tion of risks is not straightforward.
Whereas standard practice in finan-
cial markets would be to model
key risks and set aside capital for a
worst-case scenario, these idiosyn-
cratic risks are much more difficult
to measure and manage.
When investing in a high-risk
asset class, investors would typi-
cally diversify across multiple prod-
ucts, but this approach is difficult
in the crypto world as most coins
are very highly correlated as they
tend to move in the same direction.
Diversification, therefore, offers lit-
tle protection in the event of a sud-
den price move.
“Due diligence is always advised,
but in the world of cryptocurrencies,
the level required, given the land-
scape, is exponentially higher and
more difficult. A mindset change is
required not only from the require-
ments of a considerably more vola-
tile and illiquid market, but given its
extraordinary speed of evolution,”
says Mr Longmore.
Given the unpredictability of risk
and the potential for high returns,
the most prudent approach for new
investors might be to hold just
a very small proportion of their
portfolio in cryptocurrencies. This
would give some exposure without
excessive risk as the market con-
tinues to mature.
“By the end of 2017, a lot of portfo-
lio managers had to explain to their
clients why they had only achieved
single-digit returns in traditional
asset classes, while some crypto
funds had earned up to 2,000 per
cent from recent volatility. There
is ultimately little downside from
investing 1 per cent of the portfolio
in cryptocurrencies, but the poten-
tial upside is almost unlimited,” Mr
Tobler concludes.
 , ·t
�,-
zencash
ZenCash is a next generation application platform
designed to bringr publ1c at· confidential
transactions, m,essaging and media to the mass,es.

By focusing on protocol level R&D, and

decentralised infrastructure, ZenCash has created
an inclusive and provably fair ecosystem that
provides individuals, communities, and businesses
around the world, equal economic opportunlty
regardless of Qieographic location.

► To find out more, visit zencash.com